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Which MLP Subgroup Was the Winner in 2017?

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Upstream MLPs

In this article, we’ll look into the performance of various MLP subgroups in 2017. Upstream MLPs, including EV Energy Partners (EVEP) and Legacy Reserves (LGCY), comprised the worst-performing subgroup in 2017 despite strong gains in crude oil prices. Upstream MLPs fell ~40.0% in 2017. In 2017, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) ended ~10.0% lower.

Upstream MLPs’ weak performance could be mostly attributed to their weak liquidity position, production declines, and lower realized natural gas prices. The survival of these upstream MLPs still remains uncertain due to their poor financial position.

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Coal MLPs

Coal MLPs Alliance Resource Partners LP (ARLP), CNX Coal Resources (CNXC), and Foresight Energy LP (FELP) were among the worst-performing MLPs in 2017. The subgroup on average lost 15.9% in 2017.

Coal MLPs continue to lose from low natural gas prices and the corresponding switch from coal to natural gas as a fuel. For a recent update on the US coal sector, please read Analyzing the US Coal Market in the Week Ending December 22.

Liquids transportation and storage MLPs

Liquids transportation and storage MLPs, which are involved in crude oil, refined products, and NGLs transportation and terminaling, were among the worst-performing subgroups in 2017. Liquids transportation and storage MLPs fell 11.7% last year.

This trend could be attributed to weak performance from some well-known companies in the MLP subgroup, including Plains All American Pipeline (PAA), Enbridge Energy Partners (EEP), NuStar Energy (NS), and Buckeye Partners (BPL). Their weak performance numbers could be attributed to the decline in throughput volume in some regions, distribution cuts, and weakness in the commodities marketing business.

However, some of these MLPs are expected to benefit from a recovery in liquids volumes and an improved financial position in 2018.

Downstream MLPs

Downstream MLPs comprised the best-performing MLP subgroup in 2017 and rose an average of 12.9% in 2017. Among the top three MLP gainers last year, all three were downstream MLPs. We’ll look more into this topic in the next article.

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