At the core of stock values is the economic fact of supply and demand. You know how that works. Yet in the world of stocks, supply is generally open-ended. The financial world is happy to put more supply of individual stocks or shares of funds or ETFs into the market. Share price changes are almost 100% driven by changes on the demand side.
However, upcoming changes in the MLP sector will produce a significant supply reduction. The market doesn’t seem to be aware that there is also a supply side to supply and demand. This provides an attractive opportunity to pick up some unavoidable value gains.
Master limited partnerships and other companies operating in the midstream/infrastructure energy subsector have been implementing a range of financial maneuvers since energy prices and related stock prices crashed in 2015. Now late in 2018 it seems the group is at the end game of the path that has been followed for the past three years. The remaining problem is that the stock market has not yet recognized the stronger fundamentals in the sector with higher stock or unit price values.
The final step to the midstream sector restructuring is now taking place. This involves taking out of the market those midstream companies where the sponsors do not believe keeping these companies as publicly traded entities makes financial sense for the long term goals of the sponsor entities.
For example, at the beginning of 2018, there were eight publicly traded MLP general partner stocks. When this current consolidation phase is over, there will be none. Over the last few months the mergers or buy-ins of four midstream companies have been completed. Over the next few months, these stock symbols will meet the same end and no longer be publicly traded companies: SEP, EEP, AM, ENLK, WES, EQGP, VLP, DM, TLP.