MLP Monthly Report: July 2018

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

Summary

News:

1) Boardwalk Pipeline Partners, LP (BWP) announced that Loews exercised its right to acquire all of the outstanding common units of BWP. Post the transaction, Loews, will fully own BWP and BWP will cease to be publicly traded.

2) Devon Energy (DVN), the sponsor to Enlink Midstream (ENLK) will sell its stake in the Enlink Midstream complex which includes Enlink Midstream, LLC (ENLC) to an affiliate of Global Infrastructure Partners (GIP) for $3.125 billion. Post the transaction, GIP will own 64% equity interest in ENLC and 23% equity interest in ENLK. The Enlink entities are expected to remain publicly traded.

3) Tallgrass Energy Partners, LP (TEP) and Tallgrass Energy GP, LP (TEGP) completed their merger on July 2nd. TEGP was renamed as Tallgrass Energy, LP, with a new ticker, TGE, and will be taxed as a C-Corp. TGE expects to incur no federal income taxes for an estimated period of at least 10 years.

Sources: Boardwalk Pipeline Partners, LP, Enlink Midstream, Reuters, Tallgrass Energy Partners, LP and CNBC.

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell -1.6% last month as uncertainty within the space continued to cause weakness. The index has fallen -10.7% since last June. (Source: Bloomberg)

Yield: The current yield on MLPs stands at 8.22%. MLP yields remained higher than the broad market benchmarks for Emerging Market Bonds (6.64%), High Yield Bonds (6.49%), Fixed Rate Preferreds (5.54%), and Investment Grade Bonds (4.20%).1 MLP yield spreads versus 10-year Treasuries currently stand at 4.98%, higher than the long-term average of 4.35%.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 -1.05% last month. Since June 2017, the EV-to-EBITDA ratio has fallen by approximately -6.56%. (Source: Bloomberg).

Crude Production: The Baker Hughes Rig Count fell last month to 1047 rigs, falling by 12 rigs compared to last month’s count of 1059 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 10.900 mb/d in the last week of June compared to 10.769 mb/d at the end of May. (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 06/30/2018, Boardwalk Pipeline Partners, LP (BWP) was a holding in the Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.23% weighting.  Enlink Midstream Partners LP (ENLK) was a holding in the MLPX ETF, with a 0.41% weighting and the Global X MLP ETF (MLPA) with a 3.77% weighting.  Enlink Midstream, LLC (ENLC) was a holding in the MLPX ETF, with a 2.20% weighting.  Tallgrass Energy Partners, LP (TEP) was a holding in the MLPX ETF, with a 0.32% weighting and the  MLPA ETF with a 2.57% weighting.  Tallgrass Energy GP, LP (TEGP) was a holding in the MLPX ETF, with a 2.71% weighting.

MLPA ETF and MLPX ETF do not have any holding in Global Infrastructure Partners (GIP)and Devon Energy (DVN).