MLP Monthly Report: November 2019
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) Marathon Petroleum Corp (MPC) announced that it will be spinning off its gas station business, Speedway LLC, into an independent, publicly traded company. MPC has also appointed a special committee to evaluate potential strategic alternatives for its midstream business, MPLX LP (MPLX). In addition, the company announced the planned retirement of CEO Gary Heminger from MPC and MPLX.
2) Phillips 66 Partners LP (PSXP), expects its Gray Oak Pipeline to begin service in November initially before coming into full service in Q1 2020. PSXP owns 42% of the Gray Oak Pipeline joint venture. When fully operational, the Gray Oak pipeline is expected to move 900K barrels of crude oil per day from the Permian Basin and Eagle Ford to destinations near Houston and Corpus Christi, Texas.
3) News reports indicate Occidental Petroleum Corp (OXY) has decided to delay the sale of its ownership stake in Western Midstream Partners, LP (WES) until 2020, with valuations in midstream stocks falling.
Sources: CSNews, PRNewswire, Bizjournals, Reuters.
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell by -5.71% last month. The index is down by -4.65% since last October. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 8.97%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.70%), Emerging Market Bonds (5.10%), Fixed Rate Preferreds (5.09%), and Investment Grade Bonds (3.10%).1 MLP yield spreads versus 10-year Treasuries currently stand at 7.13%, higher than the long-term average of 4.57%.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 by -5.97% last month. Since October 2018, the EV-to-EBITDA ratio has fallen by approximately -21%. (Source: Bloomberg).
Crude Production: The Baker Hughes Rig Count fell last month to 830 rigs, falling by 30 rigs from last month’s count of 860 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 12.600 mb/d in the last week of October compared to 12.400 mb/d in 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 10/31/2019, MPLX LP (MPLX) was a holding in the Global X MLP ETF (MLPA), with a 7.08% weighting and the Global X MLP and Energy Infrastructure ETF (MLPX), with a 2.22% weighting, Phillips 66 Partners LP (PSXP) was a holding in the Global X MLP ETF (MLPA), with a 5.27% weighting and the Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.67% weighting, Western Midstream Partners, LP (WES) was a holding in the Global X MLP ETF (MLPA), with a 4.55% weighting and the Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.93% weighting.
MLPX ETF and MLPA ETF do not have any holding in Marathon Petroleum Corp (MPC) and Occidental Petroleum Corp (OXY).