Wunderlich's Top Takeaways From The NAPTP Conference

Wunderlich commented on the recent National Association of Publicly Traded Partnerships' (NAPTP) MLP Conference held in Orlando, Florida.

Analyst Jeff Birnbaum felt the the companies under Wunderlich’s coverage were “broadly feeling that macro conditions are stabilizing,” although doubts remained “on the sustainability of the recovery in crude prices.”

Birnbaum added that NGL prices remained concerning while companies continued to contract new projects with the potential for M&A to “heat up” in the second half of 2015.

Below are key points from the conference along with current ratings and price targets for each stock.

American Midstream Partners LP AMID - Buy, $20 price target

Birnbaum expected “a 4Q dropdown of a 50% interest in Republic Midstream (we estimate ~$140mm) from its GP, ArcLight Capital; we estimate a 9x multiple, toward the lower end of prior drops. Improved 2H results should be driven by Lavaca, the Bakken system, Longview rail terminal, and Mesquite JV. We believe the market has failed to appreciate AMID's ability to move beyond its current flat distribution outlook; improving commodity prices and dropdowns from ArcLight (e.g., its interests in Delta House might fit well with AMID's portfolio) should drive an improved 2016 outlook.”

EnLink Midstream LLC ENLC - Buy, $42 price target

Birnbaum said that no changes were forthcoming to GP/LP structure at EnLink and he believed they have the ‘perfect structure’ and did not see the need for combining the GP/LP structure. "To us, it sounds as if the ORV Pipeline is on hold as producers wait out changes in the commodity price environment, evaluate the impact of moves to the Utica Dry from Utica Wet, and contemplate the ORV Pipeline relative to other local NGL takeaway options on the table (e.g., the Cornerstone Pipeline). We believe ENLK's 31% interest in Howard Energy Partners (private) has gone largely unnoticed and could present upside potential in project optionality and/or equity valuation.”

DCP Midstream Partners, LP DPM - Buy, $42 price target

“DPM has increased its 2015/2016 hedge position to ~80%/45% of its commodity exposure, up from ~75%/25%. DPM is 60% fee-based and 90% fee-based and hedged in 2015 (80% fee-based and hedged in 2016). New hedges look to be entirely crude hedges, bringing DPM's average crude hedge price in 2015/2016 down to $82.40/$75.63 from $92.60/$90.64. DPM's GP, DCP Midstream LLC, has had some success converting POP contracts to fee-based in the Permian in particular; we believe asset sales could also be an option to bring down LLC leverage. The Keathley Canyon JV was 85% utilized in 1Q, with volumes ramping; Sand Hills was 80% utilized on increased total capacity (now 240Mb/d, up from 200Mb/d). We expect fee-based DJ volumes to grow as Lucerne 2, Grand Parkway (online by YE15), and Panola JV (online 1Q16) come online and partly mitigate the difference between 2015 and 2016 commodity margins, as hedges are set at lower prices YOY.”

Enterprise Products Partners L.P. EPD - Buy, $38 price target

“As we have discussed in notes such as our May 19 EPD initiation, production should weigh on propane prices, with increasing exports and ethane rejection counterbalancing factors. Construction of new ships in 2015/2016 should alleviate current pressure on LPG ship availability, and the Panama Canal expansion in 2017 should quicken route times to Asia. However, Northeast E&Ps today are receiving propane netbacks up to $0.40 below Mont Belvieu prices, or <$0.10/gallon.”