MLP Monthly Report: May 2018

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



1) A number of MLP roll-up transactions into the C-Corp structure were announced. Williams Partners (WPZ), Spectra Energy Partners (SEP), Enbridge Energy Partners (EEP), and Enbridge Energy Management (EEQ) all received proposals by their parent companies to be acquired, with the consolidated company taxed in the C-Corp structure. In addition, Cheniere Energy Partners LP Holdings LLC (CQH) received a proposal to be acquired by parent company, Cheniere Inc (LNG). If all these transactions were to go through, this would result in the loss of 3 LPs and 2 GPs for the industry as a whole.

2) Marathon Petroleum Corp. (MPC) will be acquiring Andeavor (ANDV) announced in a deal valued at $23 billion. Marathon will be the largest refiner in the U.S. after the transaction. Once the acquisition is complete, Marathon will have two separate MLPs, Andeavor Logistics LP (ANDX) from ANDV and MPLX LP (MPLX). The proposed transaction is expected to close in H2 2018.

3) TC PipeLines, LP (TCP) cut its distribution by 35% from last quarter. TCP expects the Federal Energy Regulatory Commission (FERC) ruling to eliminate the income tax allowance will have a material effect on cash flows. TCP says they will evaluate a switch to the C-Corp structure, citing tight financing conditions for TCP in the MLP structure at this time.

Sources: Williams Partners L.P., Enbridge Energy Partners L.P., Cheniere Energy Partners LP Holdings, LLC, Reuters, Marathon Petroleum Corp,  TC PipeLines, LP.

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, rose 6.9% last month as MLPs rebounded off of the prior month’s bottoms and oil prices rose. The index has fallen -17.6% since last April. (Source: Bloomberg)

Yield: The current yield on MLPs stands at 8.32%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (6.26%), Emerging Market Bonds (6.16%), Fixed Rate Preferreds (5.78%), and REITs (4.21%).MLP yield spreads versus 10-year Treasuries currently stand at 5.36%, higher than the long-term average of 3.92%. (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 3.51% last month. Since April 2017, the EV-to-EBITDA ratio has fallen by approximately -4.17%. (Source: Bloomberg).

Crude Production: The Baker Hughes Rig Count increased last month to 1021 rigs, rising by 28 rigs compared to last month’s count of 993 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 10.619 mb/d in the last week of April compared to 10.460 mb/d at the end of March. (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