Suburban Propane Partners LP

Over the past 12 months the group has had mixed results.

APU competes with Suburban Propane (SPH) and Ferrellgas Partners (FGP). APU is the country’s largest retail propane marketer, serving 2 million customers in all 50 states.

SPH noted that weather during this period in its service territories was normal and 9% colder than the prior year.

More expensive propane costs could cause residential customers to buy less, hurting certain MLP names.

In its “Weekly Petroleum Status Report” released on October 21, the EIA stated that residential propane prices averaged just under ~$1.90 per gallon.

U.S. propane stocks decreased by 0.1 million barrels to 80.1 million barrels as of October 31. Now, they’re 29.1% higher than the levels last year.

US residential propane demand is 1.5 MMbpd for the week ended December 4. This was 0.24 MMbpd more than the demand in the week ended November 27.

Propane names such as AmeriGas and Suburban Propane could be helped by this week’s winter storms.

Last week saw slightly colder-than-normal weather, a positive for propane companies such as AmeriGas Partners (APU), Ferrellgas Partners (FGP), and Suburban Propane Partners (SPH).

In the week ended October 9, 2015, US propane inventories rose by 1.8 MMbbls (million barrels) to 102.2 MMbbls.

Ferrellgas Partners, L.P. (FGP), a master limited partnership (MLP), is the second largest retail propane distributor in the U.S. serving all 50 states, the District of Columbia and Puerto Rico, as measured by the volume of retail sales in fiscal 2013, and the largest national provider of propane by portable tank exchange.

CVR Partners (UAN) was the top MLP gainer last week, which ended on January 5, 2018. It rose 23.2%.

Propane distributors like FGP will benefit from the season’s cold weather so far.

Upstream MLPs EV Energy Partners (EVEP), Mid-Con Energy Partners (MCEP), and Legacy Reserves (LGCY) rose 17.6%, 13.7%, and 11.8%, respectively, in the week ended September 29.

Propane production is outstripping demand by a considerable margin. This explains the steady build in propane inventories.

Of the six analysts covering NGL Energy Partners, one rated it as a “strong buy,” three rated it as a “buy,” and two rated it as a “hold.”

In the week ended August 21, US propane inventories rose by 1.9 MMbbls (million barrels) to 95.7 MMbbls.

Ferrellgas Partners (FGP) stock has fallen 38% over the last year.

In the week ended September 11, US propane inventories rose 1.1 MMbbls to 97.7 MMbbls. These levels are 20.3 MMbbls greater, or 26.2% higher, than they were in the corresponding period last year.

Propane prices increased last week, which could cut into the sales volumes of distributors such as AmeriGas and Ferrellgas.

In the week ended September 4, US propane inventories rose 0.2 MMbbls to 96.6 MMbbls. These levels are 20.5 MMbbls greater, or 27% higher, than they were in the corresponding period last year.

Suburban Propane Partners (SPH) is currently trading at a distribution yield of 14.7%.

Propane is an essential heating fuel. Its demand increases during the winter months. Much like natural gas, April through September is considered to be the “injection season” for propane. Last winter, propane prices spiked. Inventories saw record lows because of the severe winter. Prices touched a record high of ~$5 per gallon last winter.

Propane distributors such as Amerigas Partners (APU), Ferrellgas (FGP), and Suburban Propane (SPH) sell propane and related equipment to a variety of end markets. Find out what trends could hurt propane names this winter.

Ferrellgas Partners’ adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) fell to $105 million compared to $138.3 million in the corresponding quarter last year.

Hi-Crush Partners (HCLP) fell 5% during the week that ended on August 24. The stock has been on a downward trajectory for over a month.

US propane production fell from 1.651 MMbpd (million barrels per day) in the week ended August 7 to ~1.620 MMbpd in the week ended August 14.

In the week ended October 30, 2015, US propane inventories rose by 0.8 MMbbls to 102.4 MMbbls. This is 27.8% greater than in the corresponding period last year.

Cold winter weather is one of the major drivers of propane distributors’ earnings, as the fuel is used for home heating in many areas in the U.S.

Extreme volatility in propane prices could negatively affect the margins of distributors such as Ferrellgas, as the company may not be able to immediately pass on the cost of more expensive propane to its customers. From many reports, this winter season was especially tough to manage given extreme weather resulting in high demand, spikes in price, and logistical problems getting propane to end customers.

Propane distributors such as Amerigas Partners (APU), Ferrellgas (FGP), and Suburban Propane (SPH) sell propane and related equipment to a variety of end markets. Find out what trends could hurt propane names this winter.

On June 8, Ferrellgas Partners reported earnings for the quarter ending April 30, 2016. It reported a YoY (year-over-year) increase in adjusted EBITDA of 12%.

Heating degree days measure the difference between the outside temperature and room temperature to help calculate the demand for energy needed to heat a given area.

As of this date, propane inventories are 33.2 million barrels greater, or 78.3 % higher, than they were in the corresponding period last year.

Suburban Propane Partners’ (SPH) adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) rose $17.1 million over fiscal 1Q16 to $84.3 million in fiscal 1Q17.

Propane is an essential heating fuel. Propane demand increases in the winter. Last winter, propane prices spiked because inventories saw record lows.

Propane is a natural gas liquid (or NGLs). NGLs are hydrocarbons—in the same family of molecules as natural gas and crude oil. Other NGLs include Ethane, butane, and pentane.

Last winter, propane prices spiked as inventories saw record lows, thanks to severe winter. Prices touched a record high of ~$5 per gallon last winter.

Suburban Energy Finance Corp., is a 100%-owned finance subsidiaries of Suburban Propane Partners.

Prior to the Inergy deal, SPH had an average earnings before interest, taxes, depreciation, and amortization (or EBITDA) in the range of $185 million.

Recently, AmeriGas Partners (APU) and Suburban Propane (SPH) reported results for October, November, and December of 2013.

Propane distributors benefit from cold weather, which spurs increased propane demand for home heating.

Higher propane demand from the agricultural sector has helped to buoy propane prices.

Around 40% of the analysts rated Suburban Propane Partners as a “buy.” The stock offers an upside potential of 21% from the current price.

NGL Energy Partners is trading at a yield of ~14.1%. NGL Energy Partners’ distributions have been flat for the last ten quarters.

Valero Energy has announced an agreement to acquire Valero Energy Partners, which is expected to close soon.

On October 9, Antero Midstream Partners (AM) and Antero Midstream GP (AMGP) announced a simplification transaction.

OppenheimerFunds, Energy Income Partners, and City National Rochdale hold 4.1%, 3.4%, and 1.6%, respectively, of AmeriGas Partners’ outstanding shares.

Ferrellgas Partners’ ratio remains high. The company will need significant EBITDA growth to bring its leverage down meaningfully.

AmeriGas Partners (APU) lowered its adjusted EBITDA guidance range for the fiscal year ending September 30 to $625 million–$645 million.

On March 8, 2018, Ferrellgas Partners (FGP) reported its fiscal 2Q18 results. The quarter ended on January 31, 2018.

In the week ending February 9, MPLX LP (MPLX) was on Wall Street analysts’ radar for the second consecutive week.

Ferrellgas Partners (FGP) was the top MLP loser in the week ending January 12, 2017. The partnership ended the week 11.5% lower.

Suburban Propane Partners (SPH), the MLP involved in retail marketing and the distribution of propane, was upgraded by UBS last week, which ended on January 5, 2017.

Of the analysts surveyed by Reuters, 12.5% rated AmeriGas Partners (APU) as a “buy,” 62.5% rated it as a “hold,” and 25% rated APU as a “sell.”

Ferrellgas Partners (FGP), which is involved in propane logistics and distribution, was the top MLP loser in the week ending September 22.

Suburban Propane Partners (SPH) distributes propane, fuel oil, and refined fuels.

In this series, we’ll discuss the ten MLPs with the highest yields. We’ll compare the yields they offer, the reasons for the high yields, and if the yields are attractive considering the risks involved for each of these MLPs.

Of the analysts surveyed by Reuters, 10% rated AmeriGas Partners (APU) a “buy,” 50% rated it a “hold,” and 40% rated it a “sell.”

The top ten institutional investors in Star Gas Partners (SGU) own nearly 38.9% of its outstanding shares.

The total number of Star Gas Partners shares shorted was 27,797 on August 15, 2017—30% higher than the 21,342 million shorted shares on July 31, 2017.

The forward EV-to-EBITDA ratios for AmeriGas Partners (APU), Suburban Propane Partners (SPH), Ferrellgas Partners (FGP), and Star Gas Partners (SGU) are 10.4x, 9.4x, 8.3x, and 5.5x, respectively.

Ferrellgas Partners’ (FGP) capex for the nine months ended April 30, 2017, fell 70% compared to the same period in 2016.

Ferrellgas Partners’ (FGP) capex for the nine months ended April 30, 2017, fell 70% compared to the same period in 2016.

Ferrellgas Partners’ (FGP) EBITDA fell 29% in the quarter ended April 30, 2017.

According to forecasts by NOAA, the upcoming 2017–2018 winter is expected to be colder than last year’s mild winter.

Of the four propane distribution MLPs—AmeriGas Partners (APU), Ferrellgas Partners (FGP), Star Gas Partners (SGU), and Suburban Propane Partners (SPH)—only Star Gas Partners stock is in the green so far in 2017.

Of the analysts surveyed by Reuters, 57% rated Ferrellgas Partners (FGP) a “sell,” 29% rated it a “hold,” and 14% rated it a “buy.”

Ferrellgas Partners’ (FGP) performance has been under severe pressure in the last few quarters.

At the end of its latest fiscal quarter, Ferrellgas Partners’ (FGP) leverage ratio was 5.81x—higher than the ~4.5x that MLPs usually target.

Star Gas Partners (SGU) stock has risen 33% in 2016. In comparison, Suburban Propane Partners (SPH) and AmeriGas Partners (APU) have risen 23% and 30%, respectively.

Of the analysts surveyed by Bloomberg after Ferrellgas Partners’s fiscal 4Q16 results, 88% recommended a “sell” and the remaining 12% recommended a “hold.” None of the surveyed analysts rated FGP as a “buy.”

Of the analysts surveyed by Bloomberg, 89% rated Suburban Propane Partners (SPH) a “hold.” The consensus one-year target price for SPH is $32.80.

Suburban Propane Partners (SPH) reported its results for the quarter ending June 25, 2016, on August 4. The company reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $18.4 million for the quarter.

Ferrellgas Partners (FGP) has a “hold” rating from 67% of the analysts and a “sell” rating from the remaining 33%. None surveyed rated FGP a “buy.”

Suburban Propane currently trades at a distribution yield of 11.1%. This compares to 8.6%, 10.5%, and 4.5% for APU, FGP, and SGU, respectively.

AmeriGas Partners (APU) and Star Gas Partners (SGU) reported a 14% and 31% YoY drop, respectively, in their EBITDAs in the quarter ended March 31, 2016.

Above-normal temperatures in the United States in the 2015–2016 winter season lowered heating demand. This resulted in a 16% lower propane demand.

Suburban Propane Partners’ YTD returns have exceeded those of peers APU, FGP, and SGU. The Alerian MLP Index (AMZ) has generated total returns of 6% YTD.

US residential propane demand was at 1.03 MMbpd for the week ending January 15. Propane demand was 0.39 MMbpd less than the prior week’s demand.

The rise in propane demand pushed the price of propane up $0.01 per gallon. Since propane is used for heat in some US households, propane demand generally rises in mid-winter months.

In its weekly petroleum status report released on January 13, 2016, the EIA stated that US propane inventories decreased by 4.5 MMbbls to 91.9 MMbbls for the week ended January 8, 2016.

The EIA’s weekly propane and heating oil update reported that US residential propane demand is 1.3 MMbpd (million barrels per day) for the week ended January 1.

As of the week ended December 11, propane inventories were at 98.9 MMbbls. These levels were 26.2% more than they were in the corresponding period last year.

US residential propane prices averaged $1.98 per gallon for the week ended December 14, or $0.02 per gallon higher than the prices on December 7, 2015.

The EV-EBITDA ratios for Ferrellgas Partners (FGP), AmeriGas Partners (APU), Suburban Propane Partners (SPH), and Star Gas Partners (AGU) are 16.1x, 10.5x, 8.8x, and 3.2x, respectively.

Propane demand for home heating purpose is directly affected by the severity of the winter. In any given region, colder-than-normal temperatures in the winter season tend to result in greater usage.

US residential propane prices were $1.93 per gallon for the week ended November 13, or $0.02 per gallon higher than prices for the week ended November 6.

Weather forecasts, which are calling for above ordinary temperatures over a large portion of the United States, will keep propane demand low.

Residential propane prices averaged $1.91 per gallon for the week ending October 23, 2015, which was $0.01 per gallon higher than prices for the week.

The JPMorgan Chase Alerian MLP Index ETN (AMJ) fell 6.1% in the week ended September 25. The Alerian MLP Index (AMZ) is AMJ’s underlying index and fell 5.9% during the week.

The J.P. Morgan Alerian MLP Index ETN (AMJ) rose 5.2% in the week ended August 28, 2015. The Alerian MLP Index (AMZ), AMJ’s underlying index, also rose 5.1% during the week.

The JPMorgan Alerian MLP Index ETN (AMJ) fell 5.1% in the week ended August 21, 2015.

The JPMorgan Alerian MLP Index ETN (AMJ) rose 4.7% in the week ended August 14, 2015. Its underlying index is the Alerian MLP Index (AMZ).

Propane prices depend on inventory, which in turn depends on the winter’s severity. Last winter, propane prices spiked.

Last year, propane prices spiked as a result of a shortage in propane inventories. Propane shortages depend on the severity of the weather.

APU reported 1Q14 adjusted EBITDA for the three months ended December 31, 2013, as $230 million, compared to consensus EBITDA of $202 million and compared to $193 million for the same period last year.

Colder-than-normal temperatures caused strong propane demand over this winter heating season and caused propane prices to spike at points.

Prior to the Heritage deal, APU had an average EBITDA in the range of $340 million. For fiscal 2013 (ended September 30), the company delivered an EBITDA of $628 million.

AmeriGas Partners LP (APU) is a master limited partnership and the nation’s largest retail propane marketer, serving customers in all 50 states from approximately 2,500 distribution locations.