MLP Earnings Report

During July, the Alerian MLP Infrastructure Index (AMZI) fell 1.6% on a total-return basis, versus the S&P 500 Index, which was down 2% on a total-return basis. Of the four proposed initial public offerings introduced in this August column, two of them came to market in July, raising more than $300 million.

Oiltanking Partners LP (NYSE: OILT), with assets along the upper Gulf Coast engaged in the storage and transportation of crude oil, refined petroleum products and liquefied natural gas, raised over $200 million. The second was American Midstream Partners LP (NYSE: AMID), which gathers, treats, processes and transports natural gas in the Southeast.

Energy Transfer-Southern Union

In other capital markets news, the acquisition of Southern Union Co. (SUG) has been settled. In June, Energy Transfer Equity LP (ETE) agreed to merge with SUG for $7.9 billion, equivalent to $33 per share.

Later Williams Cos. (WMB) announced an acquisition proposal for $44 cash per share. In July, the matter was completed as ETE acquired SUG for $9.4 billion, including $5.7 billion in cash and ETE common units, 19% more than the original offer.

Strong earnings

Overall, MLP earnings results were primarily strong in the second quarter, although those MLPs that outperformed have assets already built (or acquired) in the growing unconventional plays, such as the Eagle Ford, Haynesville and the Granite Wash.

For example, Enterprise Products Partners LP (NYSE: EPD) reported strong results with pipelines operating at record or near record volume levels. The record capacities were a result of production growth in shale regions and the petrochemical industry’s increasing demand for natural gas liquids.

EPD’s largest organic growth project is in the Haynesville shale, with additional projects in the Eagle Ford due online in 2012.

Acquisitions

The other leading causes of strong earnings reports were various logical expansions and diversifications of some of the MLP’s geographic footprints.

Buckeye Pipeline Partners (BPL) illustrates this model best. Within the past year, BPL acquired a 100% interest in BORCO, the largest storage terminal in the Caribbean. More recently, BPL acquired more storage terminals (together with connecting pipelines) on the coast of Maine, building out their storage business in addition to their established pipeline segment.

Worst performance

Of the AMZI constituents, Exterran Partners LP (EXLP) performed the worst during the month of July, falling some 7.7%.

While this may have been partly due to a secondary offering in recent months, during their second quarter earnings report, president and chief executive Ernie Danner announced that he would be stepping down to allow someone new to pursue EXLP’s growth opportunities.

For July, the top performer in the Alerian MLP Infrastructure Index was Williams Partners (WPZ), which gained 3%.