Mid-Con Energy Partners
Mid-Con Energy Partners (MCEP), an upstream MLP, has the third-highest correlation with crude oil among MLPs. MCEP’s correlation with crude oil was 0.49 on October 6, 2017. MCEP’s high correlation with crude oil reflects the partnership’s high direct crude oil exposure due to its involvement in the production and sale of crude oil and a higher percentage of crude oil in its total production and revenue mix. Crude oil sales contributed 82.9% of the partnership’s total revenue in 2Q17.
EV Energy Partners (EVEP), another upstream MLP, has a lower correlation (0.31) with crude oil than MCEP, which could be attributed to EVEP’s lower crude oil exposure. In 2Q17, 65% of EVEP’s total production comprised natural gas in the second quarter.
Crude oil volatility and MCEP’s earnings
Crude oil price volatility has a direct impact on MCEP’s earnings, affecting its stock performance. As of June 30, 2017, MCEP had hedged ~70% of its crude oil production for the third and fourth quarter of 2017, and ~42% of its 2018 crude oil production. MCEP expects its net production to lie between 3,600–3,800 barrels of oil equivalent per day by the end of 2017.
The only analyst covering MCEP has recommended “sell.” In the next article, we’ll look into the correlation between Plains GP Holdings (PAGP) and crude oil.