Incentive Distribution Rights Data

Source: Hinds Howard, MLP HINDSight (5/1/12)

"IDRs are not dead. In fact, of the last 10 MLP IPOs, nine had IDRs, including 100% of the last 10 midstream IPOs."

I have had several questions lately regarding incentive distribution rights, so here is some data on IDRs free of charge, just remember you get what you pay for…

An article will come out soon in Midstream Business Magazine on the subject of IDRs that will feature several quotes from me and some data I pulled together for the article. The original assignment from the editor was something like, I hear a lot about how IDRs are going away, go write an article on the Death of the IDR. But I think I was able to convince the author that IDRs are not dead, in fact of the last 10 MLP IPOs, 9 of them had IDRs, including 100% of the last 10 midstream IPOs. The chart below lists the last 10 MLP IPOs. Note I am not counting MLPs without a stated minimum quarterly distribution (variable distribution MLPs like RNF and UAN).

There are two reasons I can see why IDRs are still prominent for midstream MLPs:

Doesn’t matter at the IPO – bankers will tell MLP management team (correctly) that the market will not give any extra IPO valuation credit for going public with no IDRs. A few years down the road, when the MLP reaches the top tier, then management can start to hint that the IDRs are affecting their cost of capital.

At that point, management can extract all of the extra credit that was not going to be given at IPO for those IDRs (and more) when it buys the IDRs back with L.P. equity. Short sighted investors have yet to demand that IDRs go away, so why take them away at IPO.
Reminds me of the saying, attributed to Thomas Jefferson: the exact amount of tyranny you will live under is the amount you put up with

Competitive Bids Mostly Against other MLPs – a greater percentage of E&P MLPs have chosen to IPO with no IDRs or with an LLC structure. The thesis behind E&P MLPs is that they will be the entities that roll up the mature properties of the country. When they are bidding on these assets, E&P MLPs are going up against corporations, and cost of capital is paramount to E&P MLPs being able to outbid E&P corporate bidders.

Midstream MLPs are mostly competing with each other, because there are so many more MLPs. There are not many public corporations whose primary business is gathering and processing.

Click below for an excel file with a list of every MLP and its corresponding top IDR tier, current GP % take (not counting any temporary givebacks like $ETE announced yesterday), and some notes on the MLPs that don’t have IDRs. You will note that the MLPs with paying out the most total cash flow to their GP, are in order: KMP (45%), ARLP (40%), ETP (37%), PAA (32%), WPZ (28%).

Hinds Howard
MLP HINDSight

NGL Energy Shares Rise 21% as It Seeks to Raise $2.05 Billion from Senior Secured Note Offering
Source: Streetwise Reports (01/21/2021)

Shares of NGL Energy Partners LP traded higher after the firm made a series of announcements over the past three days regarding an update on financial operations, a settlement with a customer in bankruptcy, a quarterly Class D unit distribution and a $2.05 billion senior secured debt offering.

Western Midstream Posts 99% YoY Increase in Q3 Earnings, Announces $250 Million Buyback Program
Source: Streetwise Reports (11/10/2020)

Shares of Western Midstream Partners traded 23% higher after the company reported Q3/20 financial results that included a nearly 100% growth in Net income. The firm also provided FY/21 guidance and announced a $250 million buyback program.

Altus Midstream Shares Flow Higher on Q3 Earnings and Plans for $1.50/Share Dividend in Q1/21
Source: Streetwise Reports (11/05/2020)

Shares of Altus Midstream Co. traded 170% higher after the firm reported Q3/20 financial results and announced plans to pay a quarterly dividend of $1.50 per share beginning in March 2021.

Announcing Streetwise Live! Events
Source: Streetwise Reports (07/13/2020)

Streetwise Reports is offering 100 investors—at no charge—the opportunity to meet via Zoom with executives of precious metals companies as they discuss recent developments at their companies and upcoming catalysts.

NGL Energy Partners Shares Rise 80% as the Firm Confirms 2020 Guidance
Source: Streetwise Reports (03/19/2020)

Shares of NGL Energy Partners traded higher after the company confirmed its fiscal 2020 EBITDA guidance and provided an update on current operations and capital expenditure reductions.

Tallgrass Energy Shares Rise 20% on Blackstone Partners Acquisition Deal
Source: Streetwise Reports (12/17/2019)

Shares of Tallgrass Energy LP traded 20% higher after the firm advised that it entered into a definitive merger agreement with Blackstone Infrastructure Partners to acquire all of the company's publicly held outstanding class A shares for $22.45 per share in cash.

Analyst: Outlook Positive for 'Water-Driven Turnaround Story'
Source: Streetwise Reports (01/04/2019)

This master limited partnership's presentation to analysts provided Raymond James with multiple reasons for long-term investment.

Simplification: A Positive Change for MLP Industry, Investors
Source: Adam Karpf for The Energy Report (05/30/2017)

The master limited partnership (MLP) industry, focused on energy infrastructure, is in the process of a major transformation known as "simplification," where limited partners have merged with or acquired the interests of the general partner. Adam Karpf, portfolio manager for MLP strategies at CIBC Atlantic Trust Private Wealth Management, discusses the trend toward simplification and the benefits for management teams and investors.

A Year of Tips for Winning the Natural Resource Investment War
Source: The Energy Report Staff (12/29/2015)

Energy investors are no strangers to boom-and-bust cycles. In fact, a number of the experts interviewed by The Energy Report in 2015 took a certain amount of glee in the opportunities they knew would open up in low-price markets for oil and gas, uranium and lithium.

Three Upstream MLPs with the Discipline to Succeed in the Coming Recovery: RBC Analyst John Ragozzino
Source: JT Long of The Energy Report (04/29/2015)

RBC's John Ragozzino is anticipating an oil price recovery that could bode well for upstream master limited partnerships, and knows which had the strength to hedge at the right times and which are liquid enough to take advantage of growth opportunities that could be right around the corner.