The first half of 2015 is in the books, and MLPs won’t be winning any awards for their performance. The Alerian MLP Index (AMZ), which consists primarily of large and mid-cap energy MLPs, had a total return of -11% — the worst first half performance on record. By comparison, the S&P 500 was up 1% and the price of crude oil rose 6% during the first six months of 2015, while natural gas prices declined 2%.


Nevertheless, some MLP segments fared very well, particularly those tend to perform best when oil and natural gas prices are low. Here were the top five performances for the first half of the year:

1. Alon USA Partners (NYSE: ALDW) was the runaway winner in the first half with a YTD total return (which includes the distributions) of 80.3%. ALDW owns and operates refining and petroleum products marketing businesses. Its core asset is a crude oil refinery in Big Spring, Texas (in the Permian Basin) with total throughput capacity of approximately 70,000 barrels per day (bpd). ALDW is a variable distribution MLP with an annualized yield of 12.9% based on the two most recent quarterly distributions.

2. Star Gas Partners (NYSE: SGU) with a first-half total return of 48.9%. Star Gas sells diesel fuel, gasoline and home heating oil on a delivery-only basis. Star is the nation’s largest retail distributor of home heating oil by sales volume, operating throughout the Northeast and Mid-Atlantic. SGU is also a full service energy provider specializing in the sale of home heating products, heating and air conditioning equipment, and services to residential and commercial customers. Star Gas Partners currently yields 4.3%.

3. Rentech Nitrogen Partners (NYSE: RNF), with a total return of 41.1%. RNF owns two fertilizer production plants and is a pure play on nitrogen fertilizer — which tends to do well when natural gas prices are low. RNF is another variable distribution MLP, with an annualized yield of 9.3% based on the two most recent quarterly distributions.

4. CVR Partners (NYSE: UAN), which produces fertilizer from the petroleum coke produced by the Coffeyville, Kansas refinery owned by CVR Refining (NYSE: CVRR) and located adjacent to its fertilizer operation. CVR Partners had a six-month return of 40.1%, and has an annualized yield of 7.9%.  

5. CSI Compressco (NASDAQ: CCLP), with a first half return of 39.6%. CCLP is a provider of wellhead compression-based production enhancement services for natural gas and oil exploration and production companies. Compressco’s unit price was sliced in half between mid-September and year-end, and even with the gain it has yet to reclaim last year’s high. The annualized yield based on the most recent quarterly distribution is 11.4%.

The list of worst first-half performers is unsurprisingly dominated by coal, oil and gas producers. At the bottom was coal miner Natural Resource Partners (NYSE: NRP) with a loss of 55.2%. Right behind NRP was Atlas Energy Group (NYSE: ATLS), the general partner of oil and gas producer Atlas Resource Partners (NYSE: ARP), with a loss of 47.2%. Rounding out the bottom five were Crestwood Equity Partners (NYSE: CEQP) with a loss of 44.6%, and then the oil and gas producer New Source Energy Partners (NYSE: NSLP) with a loss of 43.9% and coal MLP Alliance Resource Partners (NASDAQ: ARLP) with a loss of 39.2%.

While this first half performance by the AMZ was the worst one ever, the good news is that in every other period with a first half loss — with the exception of 2008 when crude prices were plummeting — the second half of the year turned in a positive performance.  

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

Portfolio Update

Another Crude Storm Brewing   

Crude oil bounced a bit Tuesday in the wake of Monday’s plunge of nearly 8%, but odds still favor lower prices in the near term. U.S. production has merely plateaued near the recent longtime highs, while nuclear negotiations with Iran are in the final stretch and could result in a big increase of supply from that country. Meanwhile, China’s stock market and economy are ailing, representing a significant risk to optimistic projections of rising global demand.

That’s the background for our recommendation to sell Hi Crush Partners (NYSE: HCLP). 

There is nothing wrong with the fracking sand miner that $75 crude wouldn’t cure. Unfortunately, that price is not in the offing this year given the fundamentals of global demand and supply. Sell HCLP.

— Igor Greenwald