Category Archives: MLPs

Energy partnerships simplify business models to spur growth

Some publicly-traded U.S. energy pipeline and oil-storage partnerships are restructuring into simpler business models to help attract new investors and spur growth.

Rising oil and gas production has spawned billions of dollars of new transport, gathering and storage projects. But the companies most responsible for these projects can allocate up to 50 percent of their income to the general partner, leaving less for other holders or to invest in new projects.

Historically, these firms have passed most of their income along to holders and sold equity or debt to finance new projects or acquisitions. But in the last year, what they have had to offer investors has jumped. MPLX Energy Logistics LP, for instance, paid a 9.7 percent annualized distribution last quarter to its holders, up from 7.9 percent a year earlier, according to figures from investment firm East Daley Capital Advisors.

“The higher cash yield makes the economics of these projects a little tougher,” said Kendrick Rhea, an analyst at East Daley Capital. He estimates the cost of equity has risen nearly a third for some companies in the last year.

Source: NuStar, other energy partnerships simplify business models to spur growth

MarkWest Deal is Bullish for Natural Gas Liquids and EPD -Barrons

Following Monday’s announcement that MarkWest Energy Partners (MWE) is being purchased by MPLX (MPLX), other midstream MLPs rallied.

SunTrust Robinson Humphrey analyst Tristan Richardson writes in his afternoon report on the deal:

We see the transaction as a validation of the long term demand for US NGL infrastructure. As the NGL barrel has declined, G&P firms and firms with exposure to liquids have seen valuations compress. Pro forma MPLX will be a significant handler of NGLs in the US and we think speaks to long term potential for midstream development around NGLs, despite current depressed prices.

Several Northeast players gained on the deal announcement, including Genesis Energy (GEL), up 4%, DCP Midstream Partners (DPM), up 3% and Targa Resources Partners (NGLS), up 2.5%.

Richardson believes the deal is particularly bullish for Enterprise Products Partners (EPD), which didn’t benefit on Monday. He writes:

EPD has pulled back amid concerns of NGL prices and the ability to grow in a difficult environment. The proposed deal speaks to the long term potential for the NGL market and the buildout of NGL infrastructure to new sources of market demand including NE export, Gulf export, Midwest refining and Canada, where EPD remains a leader with significant organic growth opportunities.

Richardson has a Buy rating on EPD and listed it among his favorite midstream MLP stocks in a mid-June report.

via MarkWest Deal is Bullish for Natural Gas Liquids and EPD – Income Investing –

Kinder Morgan cuts dividend by 75%

Kinder Morgan, Inc. (NYSE: KMI) today announced that its Board of Directors has approved a plan pursuant to which it expects to pay quarterly dividends of $.125 per share to its common stockholders ($.50 annually), down from its current quarterly level of $.51, beginning with the fourth quarter 2015 dividend payable in February 2016. This dividend enables the company to use a significant portion of its large cash flow to fund the equity portion of its expansion capital requirements, eliminate any need to access the equity market for the foreseeable future and maintain a solid investment grade credit rating.

Source: Kinder Morgan Announces 2016 Outlook | Media & Investor Center

Mexico to unveil energy investment vehicle in September 

Mexico plans to launch in September a new low-tax investment vehicle aimed at tapping markets to fund energy infrastructure in Latin America’s second biggest economy, four people familiar with the matter told Reuters.The new vehicle comes at a time of oil market oversupply that has depressed prices and reduced oil companies’ capacity to invest, but Mexico’s newly opened power market could still prove an attractive near-term destination.The sources said finance authorities are putting the finishing touches on rules for the vehicles, which will be similar to American “Master Limited Partnerships” (MLP) and modeled on Mexico’s successful real estate investment trusts (REIT) which are locally called FIBRAS.

Source: Mexico to unveil energy investment vehicle in September -sources | Reuters

Down Nearly 90%, Linn Energy Is Still No Bargain

Last Thursday, Linn Energy surprised Wall Street by announcing its intention to suspend its distribution at the end of the third quarter because of weak prices for oil and natural gas. The news sent the highly leveraged firm’s shares down 37%; they closed the week at $4.04.

Barron’s called Linn’s accounting aggressive two years ago when the shares were $38 (“Twilight of a Stock Market Darling,” May 6, 2013).

Photo: Courtesy of Linn Energy

Linn (ticker: LINE) is structured like a master limited partnership and pays a distribution, the MLP form of a dividend. It has long been a favorite of retail investors, who prized it for its payout. Linn has been paying a monthly distribution at a $1.25 annual rate since the start of this year, when it was cut from a rate of $2.90.

Despite the stock’s decline, Linn is no bargain. Given that debt stood at $10.3 billion at the end of the second quarter, ultimately there may be little or no value to Linn’s equity, now worth $1.5 billion.

The company faces financial pressure because the bulk of its cash flow is coming from above-market energy hedges that will roll off in the coming years. It has current-year hedges on gas at $5 per million BTUs (British thermal units), and on oil at around $88 a barrel. Current market prices are below $3 per million BTUs and $50 a barrel for oil.

Linn said Thursday that it is focused on debt reduction, announcing it had repurchased $599 million of public debt in July for 65 cents on the dollar.

via Down Nearly 90%, Linn Energy Is Still No Bargain – Barron’s.

Kinder Morgan to buy Shell’s stake in Elba Liquefaction LNG joint venture – Houston Business Journal

Houston-based Kinder Morgan Inc. (NYSE: KMI) said July 15 it agreed to buy Royal Dutch Shell’s (NYSE: RDS-A, RDS-B) interest in Elba Liquefaction Company LLC.

Also on July 15, Kinder Morgan announced an increased dividend and reported second-quarter earnings that missed analysts’ expectations.

Kinder Morgan currently owns 51 percent of the ELC joint venture, and Shell owns the remaining 49 percent. Terms of the transaction were not disclosed.

As a result of the deal, Kinder Morgan expects to invest another $630 million in the Elba Liquefaction Project, bringing the company’s total incremental investment in all of Elba’s liquefaction and terminal facilities to approximately $2.1 billion.

ELC owns the Elba Liquefaction Project, which is proposed to be constructed and operated at the existing Elba Island LNG Terminal near Savannah, Georgia. The Hague-based Shell, which has its U.S. arm headquartered in Houston, will retain its 20-year contract to subscribe to 100 percent of the terminal’s 2.5 million tonnes per year of liquefied natural gas export capacity, which is equivalent to approximately 350 million cubic feet per day of natural gas.

Permitting is underway, and the next step in the regulatory approval process is for the Federal Energy Regulatory Commission to issue a draft environmental assessment.

Construction is expected to begin in the fourth quarter, depending on regulatory approvals, and initial production is expected in late 2017.

“Our current project backlog of expansion and joint venture investments is $22 billion,” Kinder Morgan President and CEO Steve Kean said in the company’s second-quarter earnings report released July 15.

That’s up approximately $3.7 billion from the first quarter.

via Kinder Morgan to buy Shell’s stake in Elba Liquefaction LNG joint venture – Houston Business Journal.

Kinder Morgan in Houston to buy terminals from Royal Vopak – HBJ

Houston-based Kinder Morgan Inc. (NYSE: KMI) said it will put down $158 million for three terminals and an undeveloped site from the Netherlands-based tank storage company Royal Vopak.

The acquisition includes a 36-acre storage complex in Galena Park, near the Houston Ship Channel. The complex can store more than 1 million barrels of base oils, biodiesel and crude oil, and it is adjacent to Kinder Morgan’s existing Galena Park terminal, according to a company statement.

The acquisition of Royal Vopak’s assets puts Kinder Morgan’s ship channel presence at more than 400 storage tanks with storage capacity of 43 million barrels.

Kinder Morgan also purchased two terminals in Wilmington, North Carolina, and an undeveloped waterfront site in New Jersey.

The deal is expected to close in the first quarter of this year.

via Kinder Morgan in Houston to buy terminals from Royal Vopak – Houston Business Journal.

Tudor Pickering Rating Disclosure on Targa Resources Partners LP | Rock Hill Daily

Brokerage firm Tudor Pickering upgrades its rating on Targa Resources Partners LP (NYSE:NGLS). Many firms have commented on the short term and long term price target. Targa Resources Partners LP (NYSE:NGLS) should head towards $59.15 per share according to 13 Analysts in consensus. However, if the road gets shaky, the stock may fall short to $47 per share. The higher price estimate target is at $78 according to the Analysts.

Research firm Zacks has rated Targa Resources Partners LP (NYSE:NGLS) and has ranked it at 5, indicating that its shares are a Underperform. 13 Wall Street analysts have given the company an average rating of 2.39. The counter has received a hold rating based on the suggestion from 8 analysts in latest recommendations. Strong buy was given by 3 Wall Street Analysts. The counter had a buy rating from 2 analysts.

Targa Resources Partners LP (NYSE:NGLS) suffered a loss, declining 4.32% in its share price. The bears locked in total control while fighting the bulls throughout the day, which ended with the shares losing 2.06 points to close at $45.61. The selling pressure continued unabated since trading commenced at $47.75, while hitting the days high at $49.09, and the shares hit an intraday low of $44.68. In this bearish onslaught, the volume was measured at 990,255 shares. Targa Resources Partners LP (NYSE:NGLS) has a 52-week high of $83.49 and a 52-week low of $39.0501. With around 115,774,000 shares outstanding, the company has a market cap of $5,280 million.

via Tudor Pickering Rating Disclosure on Targa Resources Partners LP | Rock Hill Daily.

1 Great Way for Kinder Morgan to Grow Its Empire (KMI, MWE)

Kinder Morgan (NYSE: KMI  ) made big news during its recent earnings call when it announced the $3 billion acquisition of the Bakken midstream MLP Hiland Partners. This is in line with management’s stated goals of increased growth through acquisitions courtesy of Kinder’s $55 billion in tax breaks it will receive thanks to its recent merger with its MLPs.

With Kinder Morgan now clearly on the acquisition prowl, I’d like to point out one of my favorite midstream MLPs, one that analysts believe may be next up on the merger hit list.

The biggest reason Kinder Morgan might buy MarkWest Energy Partners

According to Jason Stevens at Morningstar, MarkWest Energy Partners (NYSE: MWE  ) might make a mouth-watering acquisition target.

via 1 Great Way for Kinder Morgan to Grow Its Empire (KMI, MWE).

Gas pipelines go public: Columbia Pipeline Partners LP sets terms for $800 million IPO

Columbia Pipeline Partners LP, an MLP spun out of NiSource to own natural gas pipelines and storage systems, announced terms for its IPO on Monday. The Houston, TX-based company plans to raise $800 million by offering 40 million shares at a price range of $19 to $21. At the midpoint of the proposed range, it would command a market value of $1.9 billion.

Columbia Pipeline Partners LP, which was founded in 2007 and booked $1.3 billion in sales for the 12 months ended September 30, 2014, plans to list on the NYSE under the symbol CPPL. Barclays, Citi, BofA Merrill Lynch, Goldman Sachs, J.P. Morgan, Morgan Stanley and Wells Fargo Securities are the joint bookrunners on the deal. It is expected to price during the week of February 2, 2015.

via Gas pipelines go public: Columbia Pipeline Partners LP sets terms for $800 million IPO –