What Can We Expect from Genesis Energy's 4Q15 Earnings?
Genesis Energy’s market performance
Genesis Energy (GEL) lost 55.4% of its market value over the past year. Crude-centric GEL has lost 44.4% since the beginning of 2016 alone. The plunge in GEL’s share price in 2016 can largely be attributed to the huge drop in crude oil prices.
GEL’s peers, Martin Midstream Partners (MMLP), NuStar Energy (NS), and Shell Midstream Partners (SHLX) lost 52.3%, 57.1%, and 25.3%, respectively, during the past year. The Alerian MLP ETF (AMLP), which comprises 22 midstream energy MLPs (master limited partnerships), has come down by 53.4%. This indicates a general weakness in the midstream sector.
Genesis Energy’s offshore acquisition
GEL completed the acquisition of Enterprise Product Partners’ (EPD) offshore pipeline and service business in July 2015. The partnership’s overall offshore throughput volumes should increase due to the increase in GEL’s ownership of offshore pipeline systems. However, this gain might be offset by the decline in the deep-water rig count. The drillship and semi-submersible rig count has continued to decline, resulting from a huge decline in crude oil prices. Throughput volumes are linked to crude oil production.
Genesis Energy’s 4Q15 distributions
GEL declared a distribution per unit of $0.66 for the fourth quarter in a press release published on January 7, 2016. This represents a 10.1% YoY (year-over-year) increase versus 4Q14, and a ~2.3% sequential increase over 3Q15. According to the related press release, “This is the forty-second consecutive quarter in which Genesis has increased its quarterly distribution. During this period, thirty-seven of those quarterly increases have been 10% or greater year-over-year.” Based on GEL’s recent distribution, the partnership is currently trading at a distribution yield of 12.8%.
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