MLP Monthly Report: April 2017

The April MLP Monthly Report can be found here, offering insights on MLP industry news, the asset class’s performance, yields, valuations, and fundamental drivers.


News: At the latest meeting of OPEC and non-OPEC members on March 26th, producers suggested extending their six-month production cut agreement through the end of 2017, although no official deal has been finalized. The MLP IPO pipeline is growing again, with Hess Midstream Partners LP expected to commence trading on April 5th. The valuation of the IPO is expected to be around $250 million. In addition, Antero Midstream GP which owns the GP interests in the natural gas MLP Antero Midstream Partners, filed for a $100 million IPO. (Source: Reuters, PE Hub, Nasdaq)

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, declined 1.46% last month partly due to lower oil prices. The index has gained 28.19% over the last one-year period. (Source: Bloomberg)

Yield: The current yield on MLPs stands at 6.85%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.84%), Emerging Market Bonds (5.52%), Preferreds (5.44%) and REITs (4.28%).1 MLP yield spreads versus 10-year Treasuries currently stand at 4.45%, higher than the long-term average of 3.63%. (Sources: Bloomberg, AltaVista Research, and Fed Reserve)

Valuations: The Enterprise Value to EBITDA ratio, which seeks to provide more color on the valuations of MLPs, increased in Q1 2017 compared to Q4 2016 as MLP unit prices appreciated. Since Q1 2016, the EV-to-EBITDA ratio has increased approximately 6.6%, as oil prices recovered from previous lows. In addition, from 2015 to 2016, MLP Debt to Adjusted EBITDA ratios fell -6.9% from 4.90x to 4.56x, as MLPs continue to make concerted efforts reduce leverage ratios. (Source: Bloomberg, MLPData, company financials).

Production Output: The Baker Hughes Rig Count increased by 70 rigs compared to last month. The rig count has risen by 420 rigs to 824 since its recent low point in May 2016 of 404 rigs. US production of crude oil rose to 9,199 in thousands of barrels produced per day in the last week of March from 9,032 at the end of February. (Source: Baker Hughes & EIA)

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month- and quarter-end, please click here.