MLP Monthly Report: March 2019
The March MLP Monthly Report can be found here offering insights on MLP industry news, the asset class’s performance, yields, valuations, and fundamental drivers.
1) EQM Midstream Partners, LP (EQM) and PBF Logistics LP (PBFX) announced the eliminations of their incentive distribution rights (IDRs) in exchange for common units to their general partner (GP). Equitrans Midstream Corporation (ETRN) now owns around 60% of the limited partner interests and retains a non-economic GP interest in EQM. PBF Energy Inc. (PBF) – the sponsor of PBFX – now owns around 54% of PBFX’s common units.
2) Summit Midstream Partners, LP (SMLP) announced the elimination of SMLP’s economic GP interest and IDRs in exchange for SMLP common units issued to its GP. SMLP also announced a 50% distribution cut beginning in Q1 2019.
3) Senate Bill 181, that would overhaul oil and gas regulation in Colorado was introduced on March 1, 2019. The bill aims to change the nature of oil and gas regulations in Colorado by shifting regulatory power more from state entities to city and local municipalities. The bill also aims to make health, welfare and environmental protection the main priority concerning energy production. The bill also makes forced pooling requirements more difficult and higher royalty rates for non-consenting mineral rights owners.
Sources: Business Wire, EQM Midstream Partners LP, PBF Logistics, LP, Summit Midstream Partners, LP, MarketWatch, The Denver Channel, The Denver Post.
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, were down by -0.67% last month. The index is down -1.2% since last February. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 8.08%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (6.54%), Emerging Market Bonds (6.23%), Fixed Rate Preferreds (5.72%), and Investment Grade Bonds (4.00%).1 MLP yield spreads versus 10-year Treasuries currently stand at 5.22%, higher than the long-term average of 4.42%.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 1.53% last month. Since February 2018, the EV-to-EBITDA ratio has fallen by approximately -16.05%. (Source: Bloomberg).
Crude Production: The Baker Hughes Rig Count fell last month to 1047 rigs, falling by 12 rigs from 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 12.100 mb/d in the last week of February compared to 11.900 mb/d in January. (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 02/28/2019, EQM Midstream Partners, LP (EQM) was a holding in the Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.79% weighting and the Global X MLP ETF (MLPA), with a 4.31% weighting.
MLPA ETF and MLPX ETF do not have any holding in PBF Logistics LP, PBF Energy Inc, Equitrans Midstream Corporation and Summit Midstream Partners, LP.