MLP Monthly Report: June 2019
The June MLP Monthly Report can be found here offering insights on MLP industry news, the asset class’s performance, yields, valuations, and fundamental drivers.
1) MPLX, LP (MPLX) acquired Andeavor Logistics, LP (ANDX) in an all-stock deal. The transaction, valued at approximately $9 billion, is expected to close in the second half of 2019. This deal will simplify the family structure under Marathon Petroleum Corporation (MPC), which owns 64% of MPLX and is the general partner and the majority owner of ANDX.
2) IFM Investors and Buckeye Partners, LP (BPL) announced that the former will acquire the latter in an all-cash deal of $6.5 billion. According to the terms of the deal, Buckeye shareholders will receive a 27.5% premium over the closing price of Buckeye on May 9, 2019. The deal is expected to close in the fourth quarter of 2019.
3) Rattler Midstream Partners, LP (RTLR), a subsidiary of Diamondback Energy, Inc. (FANG), raised $665 million through an initial public offering (IPO), making it the biggest energy IPO in 2019. The IPO was priced at $17.50, the mid-point in the range. The stock listed on May 23, 2019, finishing the day with a 10% gain over the IPO price to close at $19.24, which values the partnership at $3 billion.
Sources: PR Newswire, 24/7 Wall St, Seeking Alpha, MPLX LP, Buckeye Partners LP, Reuters, Yahoo Finance.
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell by -0.48% last month. The index is down -2.19% since last May. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 8.16%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (6.57%), Emerging Market Bonds (6.07%), Fixed Rate Preferreds (5.57%), and Investment Grade Bonds (3.60%).1 MLP yield spreads versus 10-year Treasuries currently stand at 6.00%, higher than the long-term average of 4.46%.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 -2% last month. Since May 2018, the EV-to-EBITDA ratio has fallen by approximately -24%. (Source: Bloomberg).
Crude Production: The Baker Hughes Rig Count fell last month to 984 rigs, falling by 7 rigs from last month’s count of 991 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 12.400 mb/d in the last week of May compared to 12.300 mb/d in April. (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 05/31/2019, MPLX, LP (MPLX) was a holding in the the Global X MLP ETF (MLPA), with a 5.60% weighting and the Global X MLP and Energy Infrastructure ETF (MLPX), with a 1.87% weighting. Andeavor Logistics, LP (ANDX) was a holding in the MLPA ETF with a 4.90% weighting and the MLPX ETF with a 0.66% weighting. Buckeye Partners, LP (BPL) was a holding in the MLPA ETF with a 6.00% weighting and the MLPX ETF with a 1.24% weighting.
MLPX ETF and MLPA ETF do not have any holding in Rattler Midstream Partners, LP (RTLR) and Diamondback Energy, Inc. (FANG).