MLP values disconnected from fundamentals

01.02.16. Master limited partnership (MLP) unit values have “disconnected from business fundamentals and appear instead to be tracking crude prices,” reckons NuStar Energy CEO Brad Barron.
Announcing a 21 percent jump in annual EBITDA to US$662.7 million, Barron told analysts that the partnership did “not believe NuStar’s unit price reflects the solid financial results and the stability and diversity of NuStar’s business”.
“Lost in all the hoopla over falling crude prices is any consideration of either NuStar’s strong financial performance or any semblance of a rational assessment of NuStar’s solid balanced asset portfolio,” Barron said in an earnings conference call transcription posted on Seeking Alpha.
NuStar’s unit value had slumped to a 52 week low of $25.65 in mid-January, having topped $68 in May 2015. It rebound to $32.43 on 29 January.
“Almost half of our EBITDA comes from storage, which had a record year in 2015 and is expected to have another good performance in 2016,” Barron added. “Our storage assets are primarily crude and refined products facilities and they are effectively full. We expect (these assets) to continue to perform well this year, 2017 and beyond.”
For the year ended 31 December 2015, the partnership reported net income applicable to limited partners of $257.4 million, or $3.30 per unit.
Absent the gain related to the partnership’s 2 January 2015 acquisition of the remaining 50 percent ownership in the Linden (NJ) terminal, adjusted EBITDA for 2015 would have been $606.5 million, still a record for the partnership, while adjusted net income applicable to limited partners would have been $202.2 million, or $2.59 per unit.