MLP Monthly Report: April 2021
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.
1) Saudi Aramco agreed to sell a 49% stake in the newly formed pipeline entity, Aramco Oil Pipelines Company, to an international consortium led by EIG Global Energy Partners for $12.4 billion. As part of the transaction, Aramco Oil Pipelines Company will lease usage rights in Aramco’s crude oil pipelines network for a 25-year period. Following the deal, Aramco will hold 51% stake in the new company.
2) Oasis Midstream Partners LP (OMP) will eliminate its incentive distribution rights (IDRs) and acquire the remaining stake in Bobcat DevCo LLC and Beartooth DevCo LLC from Oasis Petroleum Inc. (OAS) for $229 million in cash and approximately $510M worth of OMP common units, based on the 20-day volume weighted average price ended March 19, 2021.
3) The Organization of the Petroleum Exporting Countries and its allies (OPEC+) have agreed to gradually curb ongoing output cuts beginning May 2021. It is expected that production will increase by 350,000 barrels per day (bpd) in May, followed by 350,000 bpd in June and 400,000 bpd in July. Saudi Arabia has also released plans to curb its voluntarily output cuts gradually in the same period by adding 250,000 bpd in May, 350,000 bpd in June and 400,000 bpd in July.
Sources: Reuters, Oasis Midstream Partners LP
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, increased 8.33% last month. The index is increased by 100.36% since last March. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 9.04%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (4.94%), Fixed Rate Preferreds (4.27%), Emerging Market Bonds (4.05%), and Investment Grade Bonds (2.32%).1 MLP yield spreads versus 10-year Treasuries currently stand at 7.29%, higher than the long-term average of 5.71%.2 (Sources: Bloomberg and Fed Reserve)
Valuations: The Enterprise Value to EBITDA ratio (EV-to-EBITDA), which seeks to provide more color on the valuations of MLPs, decreased by 0.47% last month. Since March 2020, the EV-to-EBITDA ratio is up by approximately 19.62%. (Source: Bloomberg)
Crude Production: The Baker Hughes Rig Count increased to 417 rigs, increasing by 15 rigs from last month’s count of 402 rigs. US production of crude oil increased to 11100 mb/d in the last week of March compared to February levels of 10.000 mb/d. (Source: Baker Hughes & EIA)
For performance data current to the most recent month- and quarter-end, please click here
As of 3/31/2021, Oasis Midstream Partners LP (OMP) was a holding in the Global X MLP ETF (MLPA) with a 1.65% weighting.
MLPX ETF and MLPA ETF do not have any holding in Aramco Oil Pipelines Company, EIG Global Energy Partners and Oasis Petroleum Inc. (OAS).