Hedging MLPs

American Energy Security

This morning CNBC had ClipperData’s Matt Smith as a guest. He noted that U.S. net imports of crude oil and petroleum products are below 3.44 Million Barrels a Day (MMB/D), a level last seen in February 1985. OPEC, the International Energy Agency (IEA), and the U.S. Energy Information Administration are all forecasting U.S. crude oil […]

Falling Taxes and Valuations Boost Energy Infrastructure Outlook

Tax reform removed the uncertainty surrounding treatment of MLPs, in that both House and Senate plans provide some additional benefit. Although the final bill will require negotiations to reconcile the different Senate and House versions, we’ve updated the table below to reflect a 22% corporate tax rate and the Senate treatment of pass-through income for […]

November MLP Fund Flows Overwhelm Fundamentals

In a single week in mid-November, from 15th to 22nd, $317MM flowed out of MLP mutual funds. It was an extraordinary exit over such a short period, second only in recent history to the first week of December 2015, when $340MM bolted. That was a time when every seller was motivated while buyers were scarce. […]

Limited Partners, Limited Rights

Investors in Master Limited Partnerships (MLPs) have more limited rights than most equity investors in corporations. They’re called Limited Partners (LPs) for a reason. There’s often a General Partner (GP) who runs the business on behalf of the LPs. GPs have preferential economics, governance and information rights, and we concluded many years ago that the […]

Oil and Gas Output to Reach Records Next Year

Seasonal patterns can be interesting when there’s some plausible substance driving the relationship. For several years we’ve noted the persistence of November to be weak, with the best returns occurring early in the calendar year (see Why MLPs Make a Great Christmas Present). The predominance of individual investors (rather than institutions) in the sector accounts […]

Why the Shale Revolution Hasn't Yet Helped MLPs

MLP investors must wish they’d never heard of the Shale Revolution. The consequent growth in volumes of crude oil and natural gas seemed a fairly simple thesis for owners of volume-driven infrastructure assets. Increased demand for pipeline and storage capacity, for gathering and processing networks, ought to be good for the sector. But so far, […]

Energy Production Supports MLP Outlook

U.S. energy production continues to grow, boosting exports and continuing our path towards Energy Independence. The most recent weekly production figures from the Energy Information Administration (EIA) show U.S. crude output reaching 9.62MMB/D (Millions of Barrels per Day) exceeding the previous recent peak in June 2015. Production has fully recovered from the dip following Hurricane […]

The U.S. Lowers Oil Volatility

MLP investors are well aware that energy infrastructure securities move with crude oil, until that relationship inconveniently broke down during the Summer. Although we move and process far more natural gas (on an energy equivalent basis) than oil, investor sentiment causes the link. Because the economic link is weaker than sometimes implied by moves in […]

The GOP House Tax Bill Implications

Yesterday we received the first details on tax reform as the House Republicans unveiled their plan. To residents of high-tax states (including your blogger in NJ) it looks like the Republican Tax Hike Plan. Putting aside the impact on some individuals, our thoughts on the investment consequences are as follows: MLP investors should benefit, because […]

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