MLP Monthly Report: February 2020

Feb 20, 2020

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) Enterprise Product Partners L.P. (EPD) plans to utilize nearly 2% of its cash flow from operations (CFFO) to buy back its common units in 2020. During the fourth quarter of 2019, EPD affiliates purchased approximately 2.2 million of EPD’s common units for $58 million and showed an intention to continue this in 2020.

2) CNX Resources Corporation (CNX) and CNX Midstream Partners LP (CNXM) entered into a definitive agreement to eliminate CNXM’s Incentive distribution rights (IDRs) held by CNX along with its 2% general partner’s interest. In exchange, CNX would receive 26 million of CNXM’s common units, 3 million of CNXM’s class B units, and cash worth $135 million in three installments.

3) Magellan Midstream Partners, L.P (MMP) board of directors has authorized MMP to repurchase up to $750 million of common units over the course of the next three years, potentially indicating MMP views the units as undervalued.

Sources: Enterprise Product Partners LP, CNX Midstream Partners LP, Magellan Midstream Partners LP, Businesswire.

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell by -6.26% last month. The index is down by -9.90% since last January. (Source: Bloomberg)

Yield: The current yield on MLPs stands at 9.93%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.52%), Fixed Rate Preferreds (4.88%), Emerging Market Bonds (4.73%), and Investment Grade Bonds (2.80%).1 MLP yield spreads versus 10-year Treasuries currently stand at 7.95%, higher than the long-term average of 4.66%.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, fell by -3.32% last month. Since January 2019, the EV-to-EBITDA ratio has fallen by approximately -2.62%. (Source: Bloomberg).

Crude Production: The Baker Hughes Rig Count decreased last month to 790 rigs, falling by 15 rigs from last month’s count of 805 rigs. US production of crude oil stayed flat at 12.900 mb/d in the last week of January compared to 12.900 mb/d in 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 1/31/2020, Enterprise Product Partners L.P. (EPD) was a holding in the Global X MLP ETF (MLPA), with a 9.77% weighting and Global X MLP and Energy Infrastructure ETF (MLPX), with a 4.27% weighting, CNX Midstream Partners LP (CNXM) was a holding in the Global X MLP ETF (MLPA), with a 1.83% weighting, Magellan Midstream Partners, LP (MMP) was a holding in the Global X MLP ETF (MLPA), with a 8.11% weighting and Global X MLP and Energy Infrastructure ETF (MLPX), with a 3.59% weighting.

MLPX ETF and MLPA ETF do not have any holding in CNX Resources Corporation (CNX).

Category: Reports

Topics: MLPs

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Bonds and bond funds will decrease in value as interest rates rise. High yield bonds involve greater risks of default or downgrade and are more volatile than investment grade securities, due to the speculative nature of their investments. In addition to the normal risks associated with investing, real estate and REIT investments are subject to changes in economic conditions, credit risk and interest rate fluctuations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Preferred stock is subject to many of the risks associated with debt securities, including interest rate risk. In addition, preferred stock may not pay a dividend, an issuer may suspend payment of dividends on preferred stock at any time, and in certain situations an issuer may call or redeem its preferred stock or convert it to common stock.

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