MLP Protocol 051713

Posted on May 18, 2013 by

Key adjustments from last week:

  • Added Tallgrass Energy Partners, LP (TEP) to the Natural Gas & NGL Pipeline segment after its successful IPO at $21.50 on May 13.
  • Adjusted WES for a 6.1 million common unit offering at $61.18 on May 13 (3.3% discount to prior close).
  • Adjusted SPH for a 2.7 million common unit offering at $48.16 on May 13 (3.8% discount to prior close).
  • CVRR’s 12 million unit offering (13.8 million with the over-allotment) announced on May 13 was secondary units being sold by a subsidiary of CVR Energy Inc. (CVI) so CVRR did not receive any proceeds from the offering and the total outstanding units did not change:
    1. Offering priced at $30.75 on May 14 (4.7% discount to the May 13 close)
    2. This represents the first large Insider sale since the CVRR IPO that occurred only four months ago on January 16
    3. Given the already very volatile nature of the refining crack spread, large Insider sales within such a short time frame since the IPO raises my concern level for the name
    4. Icahn Enterprises is buying another 2 million CVRR units but keep in mind that is a little bit circular because Icahn Enterprises is effectively buying the 2 million units from CVR Energy, Inc. (CVI) and Icahn Enterprises owns 82% of CVI
  • On May 14 HCLP announced the planned acquisition of D&I Silica for $95 million of cash and 1.579 million units or total consideration of $125 million (roughly 5 times D&I Silica’s trailing EBITDA). The transaction is expected to close during the second quarter of 2103 (Press Release).
  • On May 15 TC Pipelines, LP (ticker TCP) announced it has entered into agreements to acquire an additional 45% interest in each of Gas Transmission Northwest LLC (GTN) and Bison Pipeline LLC (Bison) from TransCanada Corporation (ticker TRP) for an aggregate purchase price of $1.05 billion (Press Release). Highlights:
    1. Increases TCP’s portfolio by approximately one third and is expected to be immediately accretive to cash flows and earnings
    2. Management intends to recommend to the Board of Directors a 3.8% increase to the next quarterly distribution following the close of the transaction (I’m modeling the 3Q13 distribution at $0.81 to be paid in November)
    3. Will increase its interest in the GTN and Bison pipelines from 25% to 70% which will improve long-term cash flow stability by increasing the percentage of total cash flows derived from long-term ship-or-pay contracts (i.e. no integration risk at all, just increases their share of ownership in two assets they already own, classic MLP asset “drop-down” transaction)
    4. Transaction will also reduce relative exposure to Great Lakes which is currently experiencing earnings and cash flow variability
    5. Aggregate purchase price of $1.05 billion includes the assumption of $146 million of GTN’s debt, leaving cash to close of $904 million subject to certain closing adjustments
    6. TCP plans to fund this through a combination of debt and equity in a manner that enables the Partnership to maintain its solid financial position (they are BBB-, so this telegraphs future equity offerings beyond the $388 million of equity priced May 16 so don’t be surprised)
    7. Transaction is expected to close in July 2013
    8. Adjusted TCP for a 7.7 million common unit offering at $43.85 on May 16 (5.0% discount to prior close)
  • First quarter 2013 distribution announcements Quarter-over-Quarter: 58 increases, 38 flat and 2 decreases (RNF and NTI both are variable rate MLPs, NTI declared a $1.23 distribution on May 13).
  • Updated the Portfolio Analyzer for recent IPOs and the May rebalancing of the Alerian MLP Index.

I also had an article published on Seeking Alpha on Friday: MLPs and Interest Rates, How Right is Mr. Gundlach?

The MLP Protocol full Monthly Analytics Report for May is now available, the June 2013 report will be available after May 30th.

MLP Protocol Weekly Snapshot report: (click to open) MLPP 051713 Snapshot vFree

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TEP MLP IPO Preview May 2013

Posted on May 13, 2013 by

Tallgrass Energy Partners, LP (ticker TEP) is currently out on its IPO roadshow and looking to raise $287 million by selling 13.05 million common units (before the over-allotment) at a mid-point price of $22 with an indicated mid-point yield of 5.2%. They expect to price the deal tonight May 13.

IMPORTANT: TEP will provide investors with a K-1 (instead of a 1099-DIV), which makes TEP appropriate for taxable accounts. Here is the key language from the “Material Federal Income Tax Consequences” section of the Prospectus (page 209) telling you that it does not belong in an IRA:

Tax-Exempt Organizations and Other Investors

Ownership of units by employee benefit plans, other tax-exempt organizations, non-resident aliens, foreign corporations and other foreign persons raises issues unique to those investors and, as described below to a limited extent, may have substantially adverse tax consequences to them. If you are a tax-exempt entity or a non-U.S. person, you should consult your tax advisor before investing in our common units.

Employee benefit plans and most other organizations exempt from federal income tax, including individual retirement accounts and other retirement plans, are subject to federal income tax under Section 511 of the Code on unrelated business taxable income. Virtually all of our income allocated to a unitholder that is a tax-exempt organization will be unrelated business taxable income and will be taxable to it. Please read “Investment in Tallgrass Energy Partners, LP By Employee Benefit Plans.”

Paid subscribers keep an eye on your inbox for analytics on TEP.

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MLP Protocol 051013

Posted on May 11, 2013 by

Key adjustments from last week:

  • On May 6, CMLP announced plans to merge with NRGY and NRGM to create a fully integrated midstream partnership with a total enterprise value of approximately $7 billion (Press Release).
  • On May 7, PSE announced that it received a proposal from Pioneer Natural Resources Company (PXD) whereby PXD would acquire all of the outstanding, publicly-held Pioneer Southwest common units PXD does not already own through a stock-for-unit exchange.
    1. PXD is proposing consideration of 0.2234 of a share of PXD common stock for each outstanding publicly-held PSE common unit
    2. Pioneer stated that it has assumed that a regular quarterly common unit distribution of $0.52 per common unit will be declared in July and that, thereafter, common unit distributions will be suspended while the transaction is pending (Press Release)
  • Adjusted BIP for a 5.6771 million unit equity offering at $37.75 on May 7.
  • Adjusted APL and ATLS for the closing of the TEAK Midstream, LLC acquisition on May 7 (Press Release).
  • Added Emerge Energy Services LP (“EMES”) to the Other MLP segment after its IPO at $17 on May 8.
  • First quarter 2013 distribution announcements Quarter-over-Quarter: 57 increases, 37 flat and 2 decreases (RNF and NTI both are variable rate MLPs, NTI is based on the mid-point of the $1.15 to $1.25 distribution guidance they provided on April 26 so not officially final yet).
  • Ongoing 1Q13 updates as financials are filed (89 updated so far with a few stragglers remaining).

The MLP Protocol Monthly Analytics Report for May is now available, the June 2013 report will be available after May 30th.

MLP Protocol Weekly Snapshot report: (click to open) MLPP 051013 Snapshot vFree

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EMES MLP IPO Preview May 2013

Posted on May 6, 2013 by

Emerge Energy Services, LP (ticker EMES) is currently out on its IPO roadshow and looking to raise $150 million by selling 7.5 million common units at a mid-point price of $20 with an indicated mid-point yield of 14%. The distributions will be VARIABLE and the first distribution will be prorated (making the actual NTM cash yield less than 14% even if they hit their projections exactly). They expect to price the deal Wednesday, May 8th.

IMPORTANT: EMES will provide investors with a K-1 (instead of a 1099-DIV), which makes EMES appropriate for taxable accounts. Here is the key language from the “Tax Risks to Common Unitholders” section of the Prospectus (page 58) telling you that it does not belong in an IRA:

Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them.

        Investment in common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs), and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them.

        Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file federal income tax returns and pay tax on their share of our taxable income. If you are a tax-exempt entity or a non-U.S. person, you should consult a tax advisor before investing in our common units.

Paid subscribers keep an eye on your inbox for analytics on EMES.

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MLP Protocol 050313

Posted on May 5, 2013 by

Key adjustments from last week:

  • Adjusted KMP for the closing of the CPNO acquisition on April 30.
  • NTI’s equity offering on May 1 was secondary units being sold by Insiders so the company did not receive any of the proceeds. The deal was upsized to 12 million units from its initial 10 million units, so including the over-allotment Insiders sold 13.8 million units. This was the second large insider sale since NTI’s IPO on July 25, 2012. The insiders sold 18.7 million units in the IPO on July 25, 2012, sold 12.3 million units in an offering on January 17, 2013, and an additional 13.8 million units on May 1, 2013 (44.8 million out of a total of ~92 million units lowering their ownership to ~51%).
  • Ongoing 1Q13 updates as financials are filed.
  • First quarter 2013 distribution announcements Quarter-over-Quarter: 56 increases, 35 flat and 2 decreases (RNF and NTI both are variable rate MLPs, NTI is based on the mid-point of the $1.15 to $1.25 distribution guidance they provided on April 26 so not officially final yet).

The MLP Protocol Monthly Analytics Report for May is now available, the June 2013 report will be available after May 30th.

MLP Protocol Weekly Snapshot report: (click to open) MLPP 050313 Snapshot vFree

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MLP Protocol 042613

Posted on April 28, 2013 by

Key adjustments from last week:

  • Adjusted SXE for the $40 million of Series A Convertible Preferred units it issued on April 15 that was done in conjunction with an amendment to its credit facility to loosen the financial covenants.
    1. Preferred units will be paid-in-kind at a rate of $0.40 per unit (same as the common unit Minimum Quarterly Distribution) for the first four full quarters.
    2. Amendment includes additional contingent contribution by the General Partner of another $17.4 million over the next four quarters if the increased leverage ratio test has not been met.
    3. My sense is that the first quarter performance will continue to look weak and that there is a chance they may need to lower or possibly suspend the distributions to the Subordinated Units.
  • Adjusted TOO for a $150 million 7.25% Series A Cumulative Redeemable Preferred Units offering on April 22 (upsized from $140 million, expected to close on April 30).
  • First quarter 2013 distribution announcements Quarter-over-Quarter: 48 increases, 29 flat and 2 decreases (RNF and NTI both are variable rate MLPs, NTI is based on the mid-point of the $1.15 to $1.25 distribution guidance they provided on April 26 so not officially final yet).

Additional Food for Thought on NTI:

  • Insiders filed the first draft of an S-1 back on March 28 signaling their intention to sell an additional $385 million of their position (~$442.8 million with the over-allotment), so roughly 15 million units (up to ~17.25 million with the over-allotment) out of the 60.9 million they currently hold (66.3% ownership interest prior to the pending offering).
  • In addition to the 1Q13 guidance NTI provided on April 26, they amended their equity offering filing on Friday night to include that guidance.
  • What signals are the insider sales sending?
  • Paid subscribers – please see my additional thoughts in the email sent with the full Monthly Report for May.

The MLP Protocol Monthly Analytics Report for May is now available, the June 2013 report will be available after May 30th.

MLP Protocol Weekly Snapshot report: (click to open) MLPP 042613 Snapshot vFree

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MLP Protocol 041913

Posted on April 20, 2013 by

Key adjustments from last week:

  • Adjusted AMID for the following announcements on April 16:
    1. High Point Infrastructure Partners, LLC  (“High Point”), a portfolio company of ArcLight Capital Partners, LLC (“ArcLight”), acquiring 90% of AMID’s General Partner and 100% of its subordinated units
    2. Transaction resulted in a change of control of AMID
    3. AMID concurrently issuing $90 million of Series A convertible preferred units to High Point in exchange for the contribution of operating assets and approximately $15 million of cash.
    4. Acquired assets include approximately 700 miles of onshore and offshore gathering and transmission assets providing Gulf of Mexico producers with fee-based midstream services and providing $10 to $12 million of EBITDA
    5. Series A convertible preferred units priced at $17.50 per unit and are entitled to quarterly cash distributions of $0.25 per unit and in-kind quarterly distributions of $0.25 per unit for six quarters, after which they will receive the greater of the Partnership’s minimum quarterly distribution and the distribution per unit actually paid to common unit holders
    6. Overall the transactions are positive for AMID’s common unitholders, if I had managed to borrow AMID units to short on March 28 I would go ahead and cover my position (even though, as I was worried about, the fourth quarter numbers were very bad, the ArcLight transactions change my outlook)
    7. As a result of the favorable changes I adjusted my outlook for AMID distributions to now remain flat, which was an increase from my prior estimate of a cut in distributions (if I had been short AMID units I would have covered on April 17)
    8. AMID may also pursue a Subordinated Unit and Incentive Distribution Right restructure transaction near term similar to what NKA announced on April 2 (NKA press release)
    9. AMID transaction presentation (click to open): AMID-Transaction-Overview-FINAL
  • Adjusted TOO for a 2.06 million unit private equity placement offering for proceeds of approximately $60 million on April 16, so an estimated price of $29.13 per unit (~4% discount to prior closing price). The 4% discount looks very good for a PIPE transaction so I’m wondering if there are some additional “fees” that are being charged by the institution. I’ll further adjust the estimated cash proceeds if some additional details show up in an SEC filing.
  • Adjusted APL for a 10.3 million unit equity offering at $34.00 on April 17 (one day marketed deal done at a 4.1% discount to closing price prior to announcement). APL also announced plans to acquire an Eagle Ford midstream business for $1 Billion from TEAK Midstream, which is expected to close in the second quarter. APL data will be adjusted for the acquisition once it closes so until then the APL valuation will be overstated. Highlights:
    1. Assets being acquired include a 200 MMcfd cryogenic processing plant (“Silver Oak I”), 265 miles of 20″-24″ high pressure rich gas gathering lines with 750 MMcfd of throughput capacity, and a second 200 MMcfd cryogenic processing plant (“Silver Oak II”), which is expected to be delivered for installation in May of 2013 and be in service during the first quarter of 2014
    2. Total capital expenditures associated with the build-out of Silver Oak II and other projects are expected to be approximately $100 million over the next year
    3. APL introduces 2014 EBITDA guidance of $450 to $500 million and distributions of between $2.75 and $2.85 per limited partner unit does not include any future unannounced organic growth projects on its legacy business
    4. TEAK’s run-rate fourth quarter 2014 EBITDA is expected to be $160 million, currently approximately 80% fee-based
    5. TEAK assets include a large rich gas header pipeline with 750 MMcfd of throughput capacity through core producing counties including Dimmit, La Salle, McMullen, and Karnes counties in Texas
    6. Significantly increases pro forma cash flow of APL to approximately 50% fixed-fee by the end of 2014
  • First quarter 2013 distribution announcements are underway so the Quarter-over-Quarter and Year-over-Year distribution change page will be in the Weekly Snapshot throughout the announcement period, so far 28 distributions have been announced (Quarter over Quarter: 17 increases, 11 flat).

The MLP Protocol Monthly Analytics Report for April is now available, the May 2013 report will be available after April 26th.

MLP Protocol Weekly Snapshot report: (click to open) MLPP 041913 Snapshot vFree

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