Since reaching total returns of 55% in first-half 2007, upstream MLPs tracked by Wachovia Capital Markets LLC have plummeted 45% in value versus a 15% market decline for the firm's overall MLP Index-dipping 11% during the first two months of 2008 alone versus a slide of 3% for the total Wachovia MLP Index and a loss of 8% for the S&P 500.

So what's gone wrong? "The premium valuations afforded to upstream MLPs at the (mid-2007) peak may have been too rich," says Yves Siegel, senior analyst for Wachovia Capital Markets in New York. "In our view, E&P MLPs should trade at some discount to midstream MLPs to reflect their depleting asset base, direct commodity-price exposure and limited trading history or track record."

Have you had your M&A today? A survey by CFO Research Services and CIT Group Inc. reveals 48% of senior-level finance executives from both U.S. and Canadian middle market energy companies consider acquisitions to play a major role in their current business strategy, while only 10% said it plays a minor role and 42% said it contributes to their business strategy.

Some 69% expect M&A activity to increase in 2008. These executives are twice as likely to cite acquisitions as a major component of their companies' strategy as other industries (48% vs. 24%). When asked if changes in capital markets will affect completing M&A transactions, it was a 50/50 split.

Red phone anxieties. While 2008 is off to a quick start with $12 billion of assets in play, private companies are fueling the activity more so than public companies, says Scott Richardson, principal of Richardson Barr & Co. "Every time there is a Hillary or Obama ad on TV, we get a call from a private company fearful that capital gains are going from 15% to 28%." For more on Richardson's comments, see Editor's Commentary on page 2.

A stymied MLP market. The continued lack of liquidity in the MLP market has buyers and sellers stymied for choice, according to investment bankers at the recent Midstream Gas Assets A&D Summit in Houston.

"The big change in the MLP market this year is the perspective of the buyers. They are asking themselves, can I sell this into an MLP and start again? And if I do, can I compete for assets?" said Rob Pacha, managing director for Merrill Lynch & Co.

The black gold standard. "Oil has become the new gold, a financial asset in which investors seek refuge as inflation rises and the dollar weakens," says Daniel Yergin, chairman of CERA and executive vice president of IHS. "The credit crisis has been fueling the flight to oil and other commodities, and that will last until the dollar strengthens or the recession becomes more pronounced."

"Today, the falling demand for dollars is just as important as the rising demand for oil in determining the oil price," says Yergin.