Safe Haven for MLP Investors – Weakness in NGL Prices

Despite upbeat comments from most E&P and MLP management teams regarding NGL price forecasts, Wall Street analysts expect NGL weakness to persist into 2013.  Enterprise Products Partners, the biggest pipeline MLP, itself forecasts NGL supply, driven by ethane, to rise 25% by 2015 to ~3.0 MMBbl/d.  However, investors are concerned that all this ethane production will exceed the near-term demand that can be spurred from petrochemical steam cracking capacity until new ethylene crackers come into service in about 2017.  Toward that end, shorting a basket of NGL-exposed stocks has become one of the most common strategies for short-term oriented traders. 

The question for longer-term investors is how to determine NGL exposure and the impact of compressed fractionation spreads.  Lower NGL prices would harm cash flows for E&Ps, but would have mixed implications for energy infrastructure companies depending on whether they operate under volume and fee-based processing contracts with minimal commodity price exposure, or other agreements, such as percent-of-proceeds or keep-whole contracts, which would expose them to price risk. 

To read the full article, please email Tamar Essner at Tamar.Essner@thomsonreuters.com

Safe Haven for MLP Investors – Weakness in NGL Prices

Despite upbeat comments from most E&P and MLP management teams regarding NGL price forecasts, Wall Street analysts expect NGL weakness to persist into 2013.  Enterprise Products Partners, the biggest pipeline MLP, itself forecasts NGL supply, driven by ethane, to rise 25% by 2015 to ~3.0 MMBbl/d.  However, investors are concerned that all this ethane production will exceed the near-term demand that can be spurred from petrochemical steam cracking capacity until new ethylene crackers come into service in about 2017.  Toward that end, shorting a basket of NGL-exposed stocks has become one of the most common strategies for short-term oriented traders. 

The question for longer-term investors is how to determine NGL exposure and the impact of compressed fractionation spreads.  Lower NGL prices would harm cash flows for E&Ps, but would have mixed implications for energy infrastructure companies depending on whether they operate under volume and fee-based processing contracts with minimal commodity price exposure, or other agreements, such as percent-of-proceeds or keep-whole contracts, which would expose them to price risk. 

To read the full article, please email Tamar Essner at Tamar.Essner@thomsonreuters.com

Biotech Weekly Commentary (June 4 – June 8)

Put the latest biotech news in context with this week’s Biotech Commentary report, generated by Thomson Reuters IR Advisory Services analysts.  Learn about relevant clinical and regulatory news, information on partnerships and financings, notable sell-side upgrades, downgrades and price target changes, earnings recaps, and informative sector articles and videos.  Read the report.  Interested in getting similar commentaries on a daily basis – before the market opens and following the close?  Leave a comment to let us know.

 

Week of June 4– June 8, 2012

Biotechnology indices finished higher  with major US averages. Clinical updates at ASCO were in sector focus. For the week, the BTK advanced 2.44% to 1415.85, and the NBI rose 3.43% to 1283.53.

 

REGULATORY

Merck announced the FDA issued a CRL regarding the NDA for ridaforolimus in metastatic soft tissue or bone sarcoma. Merck rose 1.07% to $37.90 on Wednesday. Ariad Pharmaceuticals, which is partnered with Merck on ridaforolimus, gained 2.78% to $16.65.

GlaxoSmithKline and XenoPort announced the FDA approved Horizant ER Tablets in postherpetic neuralgia (PHN) in adults. Glaxo slipped 0.25% to $44.27 on Thursday, and XenoPort dropped 9.56%.

Biotech Weekly Commentary (May 28 – June 1)

Put the latest biotech news in context with this week’s Biotech Commentary report, generated by Thomson Reuters IR Advisory Services analysts.  Learn about relevant clinical and regulatory news, information on partnerships and financings, notable sell-side upgrades, downgrades and price target changes, earnings recaps, and informative sector articles and videos.  Read the report.  Interested in getting similar commentaries on a daily basis – before the market opens and following the close?  Leave a comment to let us know.

 

Week of May 28– June 1, 2012

Declines in biotechnology indices exceeded those in major US averages. For the week, the BTK receded 5.85% to 1382.11, and the NBI fell 4.53% to 1240.98. Each finished at the lowest levels since mid-April.

 

REGULATORY

Janssen Therapeutics, a division of Janssen Products, announced the FDA issued a CRL for a sNDA for an 800mg tablet of PREZISTA. PREZISTA is approved for once-daily oral administration of 800mg — two 400mg tablets — for the treatment of HIV-1 in treatment-naive and treatment-experienced adult patients with no darunavir resistance-associated mutations.

Exelixis announced on Wednesday it completed the filing of its rolling NDA with the FDA for cabozantinib as a treatment for patients with progressive, unresectable, locally advanced, or metastatic medullary thyroid cancer. Exelixis slipped 0.65% to $4.59.

Biotech Weekly Commentary (May 21 – May 25)

Put the latest biotech news in context with this week’s Biotech Commentary report, generated by Thomson Reuters IR Advisory Services analysts.  Learn about relevant clinical and regulatory news, information on partnerships and financings, notable sell-side upgrades, downgrades and price target changes, earnings recaps, and informative sector articles and videos.  Read the report.  Interested in getting similar commentaries on a daily basis – before the market opens and following the close?  Leave a comment to let us know.

 

Week of May 21– May 25, 2012

Biotechnology gains outpaced those in major US averages. For the week, the BTK rose 3.32% to 1467.97, and the NBI advanced 3.91% to 1299.90.

 

REGULATORY

Merck announced the FDA approved a labeling update for ISENTRESS (raltegravir) Film-coated Tablets to include 156-week data from the STARTMRK study with ISENTRESS in combination therapy compared to efavirenz in combination therapy in previously untreated (treatment-naïve) adult HIV-1-infected patients. Merck fell 0.58% to $37.60 on Monday.

Vertex Pharmaceuticals announced on Friday the CHMP issued a positive opinion by consensus recommending the approval of KALYDECO for people with CF ages 6 and older who have at least one copy of the G551D mutation in the CF transmembrane conductance regulator gene. Vertex rose 1.19% to $64.85.

New trends in MLPs: pipeline conversions

At Morgan Stanley’s midstream conference in early March, several MLP management teams discussed the prospects of converting underutilized gas pipelines that earn low tariff rates into oil pipelines.  For example, Energy Transfer Equity LP discussed the possibility of converting the Panhandle interstate natural gas pipelines (which it will acquire via the merger with Southern Union in mid to late March) to crude oil service.  Though still in a nascent stage, the natural gas to oil pipeline conversion will likely become an emerging trend as it reflects infrastructure reconfiguration to accommodate new sources of crude oil and the changing landscape of the refining markets (such as refinery closures in the Northeast).   

 

For the full article, please email Tamar Essner at Tamar.Essner@thomsonreuters.com

MLP Market Review

Master limited partnerships (MLPs) outperformed equity and credit benchmarks in April, with the Alerian eking out a gain of 1.68% while the S&P 500 fell 0.7%.  MLPs involved in natural gas storage and coal led the group with near double digit gains after having been the chief laggards of all the MLP subsectors for the past several months.  Propane MLPs, another recent underperforming sub-industry, also rebounded on support from Suburban Propane Partners LP’s proposed acquisition of Inergy LP’s retail propane business for $1.8 billion.  In other deal news, Penn Virginia Resource Partners LP’s announced acquisition of Chief Gathering LLC’s midstream assets for $1.0 billion was the latest example of consolidation focused around the Marcellus shale.    

The largest of the recent MLP deals was Energy Transfer Partners LP’s (ETP) agreement to purchase Sunoco, Inc. (SUN), in a cash and units transaction valued at $50.13 per share, reflecting a 29% premium to SUN’s 20-day average price.  ETP’s acquisition of SUN, which is not an MLP, comes on the heels of Energy Transfer Equity’s (ETE) purchase of Southern Union and Kinder Morgan’s planned purchase of El Paso Corp, reflecting a trend of large MLPs acquiring c-corporations.   

For the full article, please contact Tamar Essner at Tamar.Essner@thomsonreuters.com

 

Energy Market Money Flows

While the 13-F filing data that shows institutional investment managers’ Q1’2012 capital allocations has not yet been submitted to the SEC, filings from previous quarters reveal a consistent trend.  Money from all sectors is leaving the investment discretion of traditional equity managers, such as mutual funds, and rotating into sector-focused ETFs, bond funds, private equity and hedge funds.  Q4’2011 13-F data from the top 100 actively managed investors, as measured by their equity assets under management, indicated that these investors decreased their dollar value exposure to every single macro sector even as this quarter witnessed an 11% rise in the S&P 500.  During this period, energy experienced one of the steepest capital outflows of nearly $50 billion from the top tier of institutional investors. 

However, within oil and gas, one area that has seen increased investor appetite is the downstream operators, mirroring this subsector’s vast outperformance in the stock market.  The S&P 500 Oil & Gas Refining & Marketing Index surged more than 23% in Q1’2011, doubling the next-best faring sub-industry index, the Philadelphia Oil Service sector index, which surged 10% (and its counterpart, the S&P 500 Oil & Gas Equipment & Services index, only gained 2%).  Meanwhile, the S&P 500 E&P index rose 6% despite the fact that Brent oil climbed more than +$17/bbl, or 14%, in the first quarter.  Upstream-focused equities have underperformed Brent since early 2011 and analysts estimate that these stocks are pricing about $100/bbl crude oil, well below the current Brent price.  By contrast, refiners have outperformed even as the planned reversal of the Seaway crude oil pipeline and weaker U.S. gasoline demand have compressed differentials. 

For the full article, please email Tamar Essner at Tamar.Essner@thomsonreuters.com

A Tale of Two Quarters for MLPs

Following the gains of the first quarter, the first half of the second quarter has been, so far, marked by losses across the board.  The sell-off was ignited by the early April release of the minutes of the Federal Reserve’s March meeting, which showed that policymakers’ appetite for another round of quantitative easing significantly decreased from the prior meeting.   Amid improving economic and employment data, investors, too, appeared to shift their outlook regarding interest rates.  On 3/14/12, even before the central bank’s meeting minutes were released, the yield on the ten-year treasury increased 16 basis points to 2.27% from 2.11%, sending the prices of bonds and other yield securities, including MLPs, lower.  While the absolute yield level is still low, this move was interpreted as an indication of expectations for increases in future interest rates.   

For the full article, please email Tamar Essner at Tamar.Essner@thomsonreuters.com

Biotech Weekly Commentary (May 14 – May 18)

Put the latest biotech news in context with this week’s Biotech Commentary report, generated by Thomson Reuters IR Advisory Services analysts.  Learn about relevant clinical and regulatory news, information on partnerships and financings, notable sell-side upgrades, downgrades and price target changes, earnings recaps, and informative sector articles and videos.  Read the report.  Interested in getting similar commentaries on a daily basis – before the market opens and following the close?  Leave a comment to let us know.

 

Week of May 14– May 18, 2012

Biotechnology underperformed major U.S. averages. Investor de-risking on macro-economic uncertainty sharply impacted the sector late in the week. Meanwhile ASCO abstracts and the Bank of America Merrill Lynch Healthcare Conference received attention. For the week, the BTK fell 6.03% to 1420.72, and the NBI declined 4.75% to 1251.04.

 

REGULATORY

OraSure Technologies announced the FDA Blood Products Advisory Committee provided a unanimous positive recommendation for the company’s OraQuick In-Home HIV Test. OraSure rallied 20.33% to $10.95 on Wednesday.

Achillion Pharmaceuticals announced the receipt of a Fast Track designation from the FDA for ACH-3102 as part of an interferon-free regimen for the treatment of chronic HCV. Achillion fell 1.02% to $6.82 on Tuesday.