The first quarter of 2015 is now behind us. It was a weak quarter in general for MLPs, with the Alerian MLP Index (AMZ) falling 5% during the quarter.

While the fertilizer MLPs — as highlighted in Cheap Gas Fuels Nitrogen Nirvana — were quickly out of the gate, they slipped a few spots by the end of the quarter. The top five MLP performers for the quarter were:

1. Sanchez Production Partners (NYSE: SPP) with a quarterly gain of 50%. You never heard of them? Neither had I. It turns out that Sanchez Production Partners is the new incarnation of Constellation Energy Partners, an upstream MLP that struggled without a sponsor for years before affiliating recently with Sanchez Energy (NYSE: SN). And while its year-to-date rally is certainly impressive, it has merely restored the unit price to its level in late November, leaving it still down 43% since Sept. 2.  

2. CSI Compressco (NASDAQ: CCLP) with a gain for the first quarter of 49.7%. CCLP is a provider of wellhead compression-based production enhancement services for natural gas and oil exploration and production companies. If the name isn’t completely familiar, it may be because the partnership changed its name in December from Compressco Partners and its stock symbol from NASDAQ: GSJK. Compressco’s unit price was sliced in half between mid-September and year-end; so the subsequent gain still leaves it well shy of last year’s high. The annualized yield based on the most recent distribution is 9.4%.

3. Terra Nitrogen (NYSE: TNH) with a quarterly gain of 45.9%. TNH owns and operates a nitrogen fertilizer plant in Oklahoma. The general partner is a wholly owned subsidiary of CF Industries (NYSE: CF), the second-largest nitrogen fertilizer producer in the world. TNH is a variable distribution MLP, but the annualized yield based on the most recently announced quarterly distribution would be 6.8%.

4. Alon USA Partners (NYSE: ALDW) with a quarterly gain of 45.8%. ALDW owns and operates refining and petroleum products marketing business. Its core asset is a crude oil refinery in Big Spring, Texas with total throughput capacity of approximately 70,000 barrels per day (bpd). Like TNH, this is a variable distribution MLP but the annualized yield based on the most recent quarterly distribution would be 15%.

5. Rentech Nitrogen Partners (NYSE: RNF) with a quarterly gain of 41.6%. RNF owns two fertilizer production plants and is a pure play on nitrogen fertilizer. It is another variable distribution MLP, with an annualized yield of 4.1% based on the most recent quarterly distribution.

While there was paperwork filed for a number of IPOs, only one MLP went public during the quarter. In the first week of February Columbia Pipeline Partners (NYSE: CPPL) raised $1.1 billion in the second largest MLP IPO ever. Despite a modest projected yield of 3.4%, demand was extremely strong, with units opening well above their projected price range — and with the projected yield subsequently dropping to the current 2.5%.

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Portfolio Update

Tankers Gaining Steam

Tanker stocks have been strong of late, with fuel products hauler Scorpio Tankers (NYSE: STNG) up 16% since our December recommendation, oil tanker owner Teekay Tankers (NYSE: TNK) returning 11% over the same four months and Capital Products Partners (NASDAQ: CPLP), which runs both products and crude tankers, delivering a 31% payoff.

Charter rates that moved sharply higher in the fourth quarter of 2014 after a prolonged industry slump have since remained strong. Crude carriers have been especially in demand so far in April, with customers who had anticipated typical springtime discounts seeming to realize all at once that they won’t be on offer, as several temporary factors boosted demand.

In the medium term, if the lifting of nuclear sanctions on Iran increases that country’s oil exports, tanker rates should benefit. They could also be helped by the long-expected and likely imminent near-term peak in U.S. crude production, since the U.S. remains a major crude importer.

We think tanker stocks have much further to go if this recovery proves more durable than commonly expected. The macro conditions certainly are right for such outperformance, as is the relatively small number of new crude tankers scheduled for delivery this year.  

Buy #7 Best Buy CPLP below $10, TNK below $7.50 and STNG below $9.50.

— Igor Greenwald