MLP Monthly Report: October 2018

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



1) Antero Midstream GP LP (AMGP) and Antero Midstream Partners LP (AM) announced that AMGP will acquire AM in a roll-up transaction. As part of the transaction, AMGP will be converted into a publicly-traded corporation (C-Corp), and the combined entity will be named Antero Midstream Corporation (New AM).

2) Two other MLP roll-up transactions were announced. Dominion Energy Midstream Partners (DM) received an acquisition proposal from Dominion Energy (D). D cited the negative impact of the 2018 Federal Energy Regulatory Commission ruling on DM as one of the reasons for this roll-up. The transaction is expected to close by Q1 2019. Similarly, American Midstream Partners, L.P. (AMID) received an acquisition proposal from its parent company, ArcLight.

3) Private equity backed EPIC Midstream announced it would temporarily convert part of its planned natural gas liquid (NGL) pipeline system to a crude oil pipeline in the Permian Basin. The pipeline is estimated to be completed in Q3 2019. This would add an estimated 400k barrels per day in oil pipeline capacity. The pipeline will convert back to an NGL line when EPIC’s separate true crude oil pipeline is completed in Q1 2020.

Sources: Antero Midstream GP LP, American Midstream Partners, LP, Oil and Gas Investor, Dominion Energy, Inc., Reuters, and EPIC Midstream Holdings, LP.

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell by -2.3%. The index is down -1.2% since last September. (Source: Bloomberg)

Yield: The current yield on MLPs stands at 7.98%. MLP yields remained higher than the broad market benchmarks for Emerging Market Bonds (6.51%), High Yield Bonds (6.24%), Fixed Rate Preferreds (5.65%), and Investment Grade Bonds (4.20%).1 MLP yield spreads versus 10-year Treasuries currently stand at 4.60%, higher than the long-term average of 4.36%.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 -1.50% last month. Since September 2017, the EV-to-EBITDA ratio has risen by approximately 2.70%. (Source: Bloomberg).

Crude Production: The Baker Hughes Rig Count rose last month to 1054 rigs, rising by 6 rigs from last month’s count of 1048 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 11.100 mb/d in the last week of September compared to 11.000 mb/d at the end of August. (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 09/30/2018, Antero Midstream Partners LP (AM) was a holding in the Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.44% weighting and the Global X MLP ETF (MLPA) with a 3.75% weighting.  Antero Midstream GP LP (AMGP) was a holding in the MLPX ETF, with a 2.55% weighting.  Dominion Energy Midstream Partners (DM) was a holding in the MLPX ETF, with a 0.15% weighting.

MLPA ETF and MLPX ETF do not have any holding in Dominion Energy (D), American Midstream Partners, LP (AMID), ArcLight, and EPIC Midstream Holdings LP.