MLP Monthly Report: December 2019
The December MLP Monthly Report can be found here offering insights on MLP industry news, the asset class’s performance, yields, valuations, and fundamental drivers.
1) DCP Midstream (DCP) announced the elimination of all general partner economic interests in DCP and incentive distribution rights (IDRs) in exchange of 65 million newly issued DCP common units with an approximate equity value of $1.53 billion.
2) Noble Midstream Partners LP (NBLX) has entered into a definitive agreement to acquire its incentive distribution rights (IDRs) and also all of Noble Energy’s (NBL) remaining midstream interests for $1.6 billion. The acquisition will be completed through a combination of the partnership’s cash and common units.
3) Aramco’s initial public offering (IPO)’s, institutional tranche has been oversubscribed nearly three times making the total orders worth $50.4 billion. The Saudi government plans to sell a 1.5% stake in the company, raising $25 billion, which gives a valuation between $1.6 trillion to $1.7 trillion.
Sources: Globenewswire, Noble Midstream Press Release, Bloomberg, Reuters.
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell by -5.74% last month. The index is down by -8.85% since last November. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 9.86%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.59%), Fixed Rate Preferreds (5.12%), Emerging Market Bonds (5.08%), and Investment Grade Bonds (2.90%).1 MLP yield spreads versus 10-year Treasuries currently stand at 7.71%, higher than the long-term average of 4.60%.2
Valuations: The Enterprise Value to EBITDA ratio (EV-to-EBITDA), which seeks to provide more color on the valuations of MLPs, fell by -5.97% last month. Since November 2018, the EV-to-EBITDA ratio has fallen by approximately -14%. (Source: Bloomberg).
Crude Production: The Baker Hughes Rig Count fell last month to 802 rigs, falling by 28 rigs from last month’s count of 830 rigs. The rig count has more than doubled since its recent low point in May 2016 of 404 rigs. US production of crude oil rose to 12.900 mb/d in the last week of November compared to 12.600 mb/d in October. (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
As of 11/30/2019, DCP Midstream (DCP) was a holding in the Global X MLP ETF (MLPA), with a 4.43% weighting and the Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.43% weighting,
MLPX ETF and MLPA ETF do not have any holding in Noble Midstream Partners LP (NBLX).