MLP Monthly Report: May 2021
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.
The latest quarterly MLP Insights piece providing analysis into the midstream space can be found here as well.
1) Oil majors are raising dividends and share buybacks as there is growing confidence in the economic recovery from the quick vaccine rollouts and increased travel demand. BP (BP) is planning to buy back $500 million of shares in the second quarter, Chevron Corp (CVX) is raising its quarterly dividend by nearly 4%, and Royal Dutch Shell (RDS) and Marathon Oil Corp (MRO) are raising their dividends by 4% and 33% respectively.
2) International Energy Agency (IEA) raised its world oil demand estimate by 5.7 million barrels a day for 2021 which is 230,000 b/d more than previously forecasted, as vaccine rollouts are gathering pace and the global economy appears to be on a better footing. Still, IEA also expressed concerns about rising cases in Europe, Brazil, and the U.S., which might affect the progress.
3) CenterPoint Energy, Inc. (CNP) and OGE Energy Corp (OGE), the two largest unitholders of Enable Midstream Partners, LP (ENBL) with a stake of approximately 79%, have consented to the merger between Energy Transfer LP (ET) and ENBL. ENBL is requesting remaining common unitholders to approve the merger and the transaction is expected to close by mid-2021.
Sources: Reuters, CNBC, Financial Times, Enable Midstream Partners, LP
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, increased 7.10% last month. The index has increased by 45.19% since last April. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 8.52%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (4.79%), Fixed Rate Preferreds (4.22%), Emerging Market Bonds (3.94%), and Investment Grade Bonds (2.22%).1 MLP yield spreads versus 10-year Treasuries currently stand at 6.75%, higher than the long-term average of 5.72%.2 (Sources: Bloomberg and Fed Reserve)
Valuations: The Enterprise Value to EBITDA ratio (EV-to-EBITDA), which seeks to provide more color on the valuations of MLPs, increased by 2.26% last month. Since April 2020, the EV-to-EBITDA ratio is up by approximately 9.28%. (Source: Bloomberg)
Crude Production: The Baker Hughes Rig Count increased to 440 rigs, increasing by 23 rigs from last month’s count of 417 rigs. US production of crude oil decreased to 10.900 mb/d in the last week of April compared to March levels of 11.100 mb/d. (Source: Baker Hughes & EIA)
For performance data current to the most recent month- and quarter-end, please click here
As of 4/30/2021, Enable Midstream Partners, LP (ENBL) was a holding in the Global X MLP & Energy Infrastructure ETF (MLPX) with a 0.26% weighting. Energy Transfer LP (ET) was a holding in the Global X MLPA ETF (MLPA) with a 9.61% weighting and MLPX ETF with a 5.03% weighting.
MLPX ETF and MLPA ETF do not have any holding in BP (BP), Chevron Corp (CVX), Royal Dutch Shell (RDS), Marathon Oil Corp (MRO), CenterPoint Energy, Inc. (CNP) and OGE Energy Corp (OGE).