MLP Monthly Report: February 2019
The February MLP Monthly Report can be found here offering insights on MLP industry news, the asset class’s performance, yields, valuations, and fundamental drivers.
1) Private equity firm, Blackstone Infrastructure Partners, agreed to acquire Tallgrass Energy LP (TGE)’s general partner (GP), Tallgrass Energy GP, LLC, for around $3.3 billion. The deal is expected to close in Q1 2019. Blackstone will own approximately 44% of TGE.
2) Enterprise Products Partners L.P. (EPD) announced a $2 billion unit buyback program over multiple years to increase the amount of capital returned to its investors. The timing, pace, and existence of the buyback program will depend on EPD’s financial performance, organic growth and acquisition opportunities, and unit price, among other factors.
3) In January 2019, MLPs and C-Corps bounced back after a tough December, with MLPs, as measured by the Solactive MLP Infrastructure Index, rallying 14.6%, and the broader asset class including C-Corps, as measured by the Solactive MLP & Energy Infrastructure Index, rallying 16.2%. The stronger performance was driven by higher oil prices, abating of tax loss selling, and reduced interest rate hike expectations from the Fed.
Sources: The Blackstone Group L.P. (BX), StreetInsider, Enterprise Products Partners L.P. (EPD), S&P Global, Bloomberg, MLPguy.
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, were up by 14.6% on broad market strength and reduced tax loss selling pressures. The index is down -11.3% since last January. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 8.07%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (6.90%), Emerging Market Bonds (6.33%), Fixed Rate Preferreds (5.85%), and Investment Grade Bonds (4.20%).1 MLP yield spreads versus 10-year Treasuries currently stand at 5.35%, higher than the long-term average of 4.41%.2 (Sources: Bloomberg, AltaVista Research, and Fed Reserve)
Valuations: The Enterprise Value to EBITDA ratio (EV-to-EBITDA), which seeks to provide more color on the valuations of MLPs, rose 6.17% last month. Since January 2018, the EV-to-EBITDA ratio has fallen by approximately -1.75%. (Source: Bloomberg).
Crude Production: The Baker Hughes Rig Count fell last month to 1059 rigs, falling by 24 rigs from last month’s count of 1083 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 11.900 mb/d in the last week of January compared to December. (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 01/31/2019, Tallgrass Energy LP (TGE) was a holding in the Global X MLP and Energy Infrastructure ETF (MLPX), with a 4.67% weighting. Enterprise Products Partners L.P. (EPD) was a holding in the MLPX ETF, with a 4.49% weighting and the Global X MLP ETF (MLPA) with an 11.30% weighting.
MLPA ETF and MLPX ETF do not have any holding in Tallgrass Energy GP, LLC.