MLP Monthly Report: November 2018

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



1) Two MLP roll-up transactions were announced during the month. EnLink Midstream Partners (ENLK) received an acquisition proposal from its C-Corp general partner, EnLink Midstream (ENLC). The transaction is expected to close by Q1 2019, after which ENLC’s incentive distribution rights (IDRs) in ENLK will be eliminated and ENLC will be a simplified publicly traded C-Corp midstream entity. In addition, Valero Energy Partners LP (VLP) will be acquired by its parent company, Valero Energy Corporation (VLO), in a roll-up transaction.

2) Buckeye Partners, L.P. (BPL) announced a 41% distribution cut for its LP unitholders in Q3 2018, along with multiple asset sales. BPL took these actions to reduce leverage and maintain its investment grade credit rating, and improve its financial flexibility.

3) Shell Midstream (SHLX) announced it expects its sponsor to waive IDR growth for 2019. IDR’s for 2019 would be capped at around Q4 2018 levels, with the waiver worth approximately $50 million.

Sources: Valero Energy Partners, LP, EnLink Midstream Partners, LP, Buckeye Partners, L.P., Reuters, and Shell Midstream Partners, L.P.

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell by -8.1% on broad market weakness and lower oil prices. The index is down -4.0% since last October. (Source: Bloomberg)

Yield: The current yield on MLPs stands at 8.41%. MLP yields remained higher than the broad market benchmarks for Emerging Market Bonds (6.93%), High Yield Bonds (6.86%), Fixed Rate Preferreds (5.86%), and Investment Grade Bonds (4.50%).1 MLP yield spreads versus 10-year Treasuries currently stand at 4.85%, higher than the long-term average of 4.37%.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 -2.53% last month. Since October 2017, the EV-to-EBITDA ratio has risen by approximately 6.04%. (Source: Bloomberg).

Crude Production: The Baker Hughes Rig Count rose last month to 1068 rigs, rising by 14 rigs from last month’s count of 1054 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 11.200 mb/d in the last week of October compared to 11.100 mb/d at the end of September. (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 10/31/2018, EnLink Midstream Partners LP (ENLK) was a holding in the Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.46% weighting and the Global X MLP ETF (MLPA) with a 3.88% weighting.  Shell Midstream Partners, L.P. (SHLX) was a holding in the MLPX ETF, with a 0.48% weighting and the MLPA ETF, with a 4.11% weighting.  Buckeye Partners, L.P. (BPL) was a holding in the MLPX ETF, with a 0.92% weighting and the MLPA ETF, with a 5.06% weighting.  EnLink Midstream LLC (ENLC) was a holding in the MLPX ETF, with a 1.71% weighting.  Valero Energy Partners LP (VLP) was a holding in the MLPX ETF, with a 0.16% weighting.

MLPA ETF and MLPX ETF do not have any holding in Valero Energy Corporation (VLO).