MLP Monthly Report: March 2017

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


News: Marathon Petroleum Corp. (MPC) dropped down just over $2 billion in assets to its MLP, MPLX. $504m in MPLX equity issued to MPC and $1.5bn in cash from recent debt offerings will finance this dropdown. Enbridge Inc. (ENB) completed their previously announced merger with Spectra Energy Corp (SE). Through this transaction, Spectra Energy’s common stock will be delisted and deregistered. The common shares of Enbridge will continue to trade under the same ticker. Tesoro agreed to waive $100 million of general partner IDR payments over 2017 and 2018 in an effort to open up further growth opportunities for Tesoro’s limited partner, Tesoro Logistics, L.P. (Source: MPLX, Enbridge, GlobaNewswire).

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, gained 0.79% last month. The index has gained 42.02% over the last one-year period. (Source: Bloomberg)

Yield: The current yield on MLPs stands at 6.78%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.58%), Emerging Market Bonds (5.49%), Preferreds (5.42%) and REITs (4.52%).1 MLP yield spreads versus 10-year Treasuries currently stand at 4.42%, higher than the long-term average of 3.61%. (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 Q4 2016 compared to Q3 2016 as MLP share prices appreciated, partly due to stabilizing oil prices. Since the end of 2015, the EV-to-EBITDA ratio has fallen approximately -0.8%, despite increasing unit prices. From 2015 to 2016, MLP Debt to Adjusted EBITDA ratios fell -6.9% from 4.90x to 4.56x, as MLPs continued to make concerted efforts reduce their debt burdens. (Source: Bloomberg, MLPData, company financials).

Production Output: The Baker Hughes Rig Count increased by 42 rigs compared to last month. The rig count has risen by 350 rigs to 754 since its recent low point in May 2016 of 404 rigs. US production of crude oil rose to 9,032 in thousands of barrels produced per day in the last week of February from 8,915 at the end of January. (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.