The first half of 2014 is in the books, and it was a good one for publicly traded Master Limited Partnerships (MLPs), and for the energy sector overall. The Standard & Poor’s 500 Energy index rose 12 percent in the first half, compared to a 7 percent rise for the S&P 500. Most of the gains in the energy sector took place in the second quarter, with the S&P 500 Energy index up 11 percent, more than double the nearly 5 percent gain for the S&P 500.

But MLPs outperformed the S&P 500 and even the broader energy market rally. The Alerian MLP Index gained 13.6 percent in the first half, with a total return (factoring in yield) of 16.8 percent. As with the broader energy markets, the gains occurred mostly in the second quarter, which delivered a total return of 14.2 percent.

There were six initial public offerings (IPOs) of MLPs in the first half of the year. They were:

• Cypress Energy Partners (NYSE: CELP), a growth-oriented MLP providing saltwater disposal and other water and environmental services to US onshore oil and natural gas producers in North Dakota and west Texas

• Enable Midstream Partners (NYSE: ENBL), a joint venture by affiliates of CenterPoint Energy (NYSE: CNP), OGE Energy (NYSE: OGE) and ArcLight Capital Partners. Enable Midstream Partners is one of the largest midstream partnerships in the US, with oil and gas midstream assets that extend from western Oklahoma and the Texas Panhandle to Alabama and from Louisiana to Illinois

• GasLog Partners (NYSE: GLOP), an offshoot of GasLog (NYSE: GLOG). GasLog Partners owns three liquefied natural gas (LNG) carriers dropped down from GLOG, and has options to purchase 12 more

• PBF Logistics (NYSE: PBFX), a midstream company formed by PBF Energy (NYSE: PBF) that will serve as the primary vehicle to expand the logistics assets supporting its business. The partnership currently supports crude oil logistics for three PBF Energy refineries and will own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets

• Foresight Energy Partners (NYSE: FELP), a coal producer operating four underground mining complexes in the Illinois Basin. FELP is one of the largest owners of coal reserves in the US, and claims to be the lowest cost and highest margin domestic thermal coal producer

• Viper Energy Partners (NASDAQ: VNOM), a spinoff from Diamondback Energy (NASDAQ: FANG). Viper owns mineral rights on 14,804 acres in the Permian Basin in West Texas, and became the first US-listed partnership structured on the basis of royalty payments

In addition to the MLP IPOs, momentum continued to build for the financial instrument known as a YieldCo. (See YieldCos: The Pseudo-MLP.) Spanish power plant builder Abengoa (NASDAQ: ABGB) formed Abengoa Yield (NASDAQ: ABY) to own two concentrating solar power plants in the US, two smaller ones in Spain, and a handful of other assets (a mix of renewable and nonrenewable).

Another YieldCo, Nextera Energy Partners (NYSE: NEP) which will own and operate renewable energy plants built by NextEra Energy (NYSE: NEE) launched June 27. NEP priced its IPO at $25 per share, then saw the share price surge to $32.36 on the first day of trading. NEP’s initial portfolio will consist of wind and solar farms in the US and Canada with a total generating capacity just under a gigawatt.

Another milestone in the first half of 2014 came when the first major integrated oil and gas company made plans to launch an MLP. According to the S-1 registration statement with the Securities and Exchange Commission (SEC), Shell Midstream Partners (which will trade as SHLX) plans to raise up to $750 million in the IPO for sponsor Royal Dutch Shell (NYSE: RDS-A). Assets included in the IPO are a 1.6 percent interest in Colonial Pipeline Company, which owns the largest refined products pipeline in the US; a 43 percent interest in Zydeco Pipeline Company, which will own the Ho-Ho crude oil pipeline system; a 28.6 percent interest in Mars Oil Pipeline Company, which owns the Mars crude oil pipeline; and a 49 percent interest in Bengal Pipeline Company, which owns a refined products pipeline that connects four refineries in Louisiana.

The top performing MLP of the first half was Emerge Energy Services (NYSE: EMES), a supplier of sand used in hydraulic fracking (+146 percent). The second leading gainer with a gain of 110 percent was Phillips 66 Partners (NYSE: PSXP), which IPO’d a year ago and consists of midstream assets dropped down from its sponsor, Phillips 66 (NYSE: PSX).

Rounding out the top five were Hi-Crush Partners (NYSE: HCLP), another supplier of fracking sand (+71 percent), EQT Midstream Partners (NYSE: EQM), a midstream provider in the Appalachian Basin (+66.5 percent), and Valero Energy Partners (NYSE:VLP) (+61.5 percent), which consists of midstream assets dropped down from the refiner Valero Energy (NYSE:VLO).

The worst performer in the first half was Oxford Resource Partners (NYSE: OXF), a coal producer that suspended its distribution more than a year ago and has seen its unit price continue to decline. It is down 31.5 percent in 2014. Boardwalk Pipeline Partners (NYSE: BWP) saw the second worst decline in the first half of 2014 after announcing a distribution cut of more than 80 percent. BWP saw its unit price plunge by 46 percent in a single trading session. It has since recovered somewhat, but is down 28.8 percent year-to-date.

Rounding out the bottom five were OCI Partners (NYSE: OCIP), a methanol and ammonia producer (-24 percent YTD), Natural Resource Partners (NYSE: NRP), another coal producer (-19 percent), and Eagle Rock Energy Partners (NASDAQ: EROC), an oil and gas production partnership (-17 percent).

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

Portfolio Updates

SemGroup Surges in the Stretch

Few energy stocks have enjoyed a hotter recent stretch than SemGroup (NYSE: SEMG), which has returned 16 percent stretch since we added it to the Growth Portfolio on June 10.

The gains followed an early June acquisition of 124 Chesapeake Energy (NYSE: CHK) crude trucks, expanding the gathering footprint of SemGroup’s sponsored Rose Rock Midstream (NYSE: RRMS) MLP beyond North Dakota and Colorado into Texas, Oklahoma and Ohio.

On June 23, after announcing the dropdown of the remaining third of its interest in a crude pipeline subsidiary to Rose Rock, SemGroup and its affiliate raised their annual profit and distribution targets, citing “the impact of recent acquisitions as well as higher volumes on its existing business.” And while the 5 percent bump in an EBITDA forecast following an acquisition is hardly a home run, investors were buoyed by news that SemGroup’s modest dividend would rise 40-45 percent this year, instead of the previously promised 25-30 percent.

Rose Rock, in turn, is now aiming for a 25 percent distribution increase in 2014, up from prior guidance of 15 percent. By recent standards, its current yield of 4 percent is relatively generous given that growth rate.

We continue to see SemGroup’s crude logistics and gas processing assets as an excellent play on the North American drilling boom and on investors’ ravenous appetite for both yield and growth. Still, a period of digestion may be in order soon. Buy SEMG below $82.

— Igor Greenwald