The view from the buy-side - mlpassociation.org · 2014. MLP Distributions. Energy Earnings. ......
Transcript of The view from the buy-side - mlpassociation.org · 2014. MLP Distributions. Energy Earnings. ......
The view from the buy-sideMay 22, 2015
MLP market cap MLP funds market cap
Growth of MLP asset class vs. MLP funds
Source: Wells Fargo; Tortoise Capital Advisors as of 4/30/2015.
$54 $68 $107
$145
$88
$156
$224
$280 $331
$445
$505 $503
$2 $2 $3 $3 $2 $4 $11 $16 $26 $46 $65 $66
0
100
200
300
400
500
600
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD2015
$ in
bill
ions
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Midstream 53%
Services 2%Renewables 2%Refining 2%Water Handling 1%Frac Sand 1%Storage 1%Mining 1%Timber 1%Petrochemical 1%
Variable pay 8%
Upstream 10%
Shipping 8%
Coal 5%
Propane 4%
Source: Tortoise Capital Advisors, Bloomberg as of 4/30/2015.
Energy MLP market breakdown
Total # of energy MLPs: 120Total energy MLP market cap ($B): $503
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Closed-end funds Exchange traded products Open-end funds
MLP fund net flows by quarter (2010-present)
Source: US Capital as of 4/30/2015.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Mar
-10
Jun-
10
Sep
-10
Dec
-10
Mar
-11
Jun-
11
Sep
-11
Dec
-11
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
Mar
-14
Jun-
14
Sep
-14
Dec
-14
Apr
-15
Cap
ital i
nflo
ws
($ in
mill
ions
)
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Closed-end funds Exchange traded products Open-end funds
MLP fund net flows by month
Source: US Capital. Data from 11/30/2014 - 4/30/2015.
0
200
400
600
800
1,000
1,200
1,400
1,600
Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15
Cap
ital i
nflo
ws
($ in
mill
ions
)
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The performance data quoted represents past performance and does not guarantee future results. Index returns are for illustrative purposes only and do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. MLPs – Yorkville MLP Universe Index. Energy – Energy Select Sector Index. Exploration & Production –Oil &
Gas Exploration & Production Select Industry Index. Data from 6/20/14-5/15/15. Source: Yorkville, Bloomberg.
Energy Equities Performance Since Crude Oil Peak
MLPs
-4.2%
S&P Energy
-18.5%
S&P Exploration & Production
-38.1%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15
MLPs S&P Energy S&P Exploration & Production
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The performance data quoted represents past performance and does not guarantee future results. Index returns are for illustrative purposes only and do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Data from 1/1/2000-12/31/2014.
Based on the distributions of the Alerian MLP Index and earnings of the Select Sector Energy Index. Source: Yorkville, Bloomberg.
MLP Distributions vs. Energy Co. Earnings MLPs Deliver Stable Growth
$25
$35
$45
$55
$65
$75
$85
$95
$14
$16
$18
$20
$22
$24
$26
$28
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
MLP Distributions Energy Earnings WTI ($/bbl)
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The performance data quoted represents past performance and does not guarantee future results. Source: Yorkville. Based on Yorkville MLP Universe Indexes. 1Q15 versus 1Q14.
. Source: Yorkville, Bloomberg.
Growth and Stability Scores by MLP Sector
19%
15% 13%
12%
8% 8% 7%
11%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
(10.0)
(8.0)
(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
8.0
10.0
GeneralPartners
Crude OilPipelines
RefinedProduct
Pipelines
EnergyServices
Gathering &Processing
Downstream MarineTransportation
Natural GasPipelines
NaturalResources
Exploration &Production
Gro
wth
Sco
re
Sta
bilit
y S
core
Stability Score Growth Score-38%
-48%
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C-Corp Roll-Ups of Affiliated MLPs
Emerging Trend?
Why is it happening?
Tax Implications
Implications for Investors
Other likely candidates?
Circle of Life?
KMP/KMR
KMI
WPZ
WMB
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FOR USE WITH INTENDED AUDIENCE ONLY – NOT FOR FURTHER DISTRIBUTION.
Evolution of General Partners in AMZ Index At their peak in December 2007, GPs represented 20% of the constituents and 11.8% of the weight of the AMZ Index.
Many GPs were absorbed by underlying MLPs between 2010 and 2012.
Alerian removed GPs from the index as of the June 2013 rebalancing.
Source: Alerian Capital Management, May 2015.
For illustrative purposes only.
6 10 7 6 4 3 2 0 0 0
3 3 3
2 5
7
12 12 14
4.5%
11.8%
8.7%
7.0%
5.3%
4.9%
5.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0
2
4
6
8
10
12
14
16
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
No. of GPs in AMZ Index GPs Not In AMZ GP Weight in AMZ Index
GP Weight in AMZ Index
Num
ber o
f GPs
Year
Aggregate G
P Weight
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FOR USE WITH INTENDED AUDIENCE ONLY – NOT FOR FURTHER DISTRIBUTION.
MLP General Partner Investment Universe GPs are not included in the Alerian MLP Index (weighting 0%).1
GPs comprise 14.4% of the S&P MLP Index.2
1 FactSet as of May 19, 2015. 2 Bloomberg, May 19, 2015.
Most GPs are structured as C-Corps, not LPs
MLP GPs –7 Market Cap ($MM)1
ETE – Energy Transfer Equity, L.P. $37,054
WGP – Western Gas Equity Partners LP $13,931
EQGP - EQT GP Holdings LP $8,842
AHGP - Alliance Holdings GP, L.P. $2,985
NSH - NuStar GP Holdings, LLC $1,669
CEQP - Crestwood Equity Partners LP $966
ATLS - Atlas Energy Group LLC $183
Total Market Cap $65,629
Midstream Corporations – 7 Market Cap ($MM)1
KMI – Kinder Morgan Inc. Class P $92,282
ENB – Enbridge, Inc. $43,668
TRP – TransCanada Corporation $31,898
SE – Spectra Energy Corp $24,389
PPL – PPL Corporation $22,903
LNG – Cheniere Energy, Inc. $18,245
SEMG – SemGroup Corporation Class A $3,621
Total Market Cap $237,006
The figures presented are unaudited, as of the date shown and are subject to change. Salient is under no obligation to update recipients.
C-Corp GPs (Pure Play) – 7 Market Cap ($MM)1
WMB – The Williams Companies, Inc. $40,215
PAGP – Plains GP Holdings LP Class A $17,987
OKE – ONEOK, Inc. $9,572
ENLC – EnLink Midstream, LLC $9,538
TRGP – Targa Resources Corp. $5,645
TEGP – Tallgrass Energy GP LP Class A $5,058
TK – Teekay Corporation $3,468
Total Market Cap $91,483
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FOR USE WITH INTENDED AUDIENCE ONLY – NOT FOR FURTHER DISTRIBUTION.
Disclosures The opinions expressed in these materials represent the personal views of Salient’s investment professionals and are based on their broad investment knowledge, experience, research and analysis. However, market conditions, strategic approaches, return projections and other key factors upon which the views presented in these materials are based remain subject to fluctuation and change. Consequently, it must be noted that no one can accurately predict the future of the market with certainty or guarantee future investment performance.
This presentation contains “forward-looking statements.” Forward-looking statements can be identified by the words “may,” “will,” “intend,” “expect,” “estimate,” “continue,” “plan,” “anticipate,” “could,” “should” and similar terms and the negative of such terms. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect actual results are the performance of the portfolio securities, the conditions in the U.S. and international financial markets, and other markets and factors. Actual results could differ materially from those projected or assumed in our forward-looking statements.
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This presentation is provided without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and does not contain investment recommendations. This publication is also designed to provide general information about economics, asset classes and strategies. All sector and asset allocation recommendations must be considered in the context of an individual investor’s goals, time horizon and risk tolerance. Not all asset classes and strategies will be suitable for all investors.
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MLP returns have the potential to be highly volatile, an MLP is also subject to liquidity risk, potential conflicts of interest as a result of the MLP ownership structure and the risks of the specific sector in which the MLP is concentrated.
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