MLP Monthly Report: October 2020
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) TC Energy (TRP) offered to acquire all of the common units outstanding of TC Pipelines (TCP) that it presently does not own. In this all-stock transaction, each publicly-held TCP common unit would receive 0.65 TRP common units, representing a 7.5% premium based on the 20-day volume weight average prices of TCP’s common units.
2) Kelcy Warren, co-founder and Chief Executive Officer of Energy Transfer LP (ET), will step down effective January 1, 2021. He will be succeeded by executives, Mackie McCrea and Tom Long, as co-CEOs. Warren will continue as Executive Chairman of ET and Chairman of the company’s board of directors, and remains ET’s largest unitholder.
3) Chevron (CVX) completed its previously announced acquisition in July of Noble Energy (NBL). In conjunction with the transaction, Noble Midstream Partners (NBLX) announced management and board changes, including appointing COO, Robin Fielder, as CEO. Chevron (CVX) now holds approximately 63% of outstanding NBLX Limited Partner units.
Sources: TC Pipelines, Energy Transfer, Noble Midstream Partners.
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, decreased 13.59% last month. The index is down by 52.35% since last September. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 17.71%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (6.12%), Fixed Rate Preferreds (4.60%), Emerging Market Bonds (4.09%), and Investment Grade Bonds (2.05%).1 MLP yield spreads versus 10-year Treasuries currently stand at 16.07%, higher than the long-term average of 5.45%.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, decreased by 6.64% last month. Since September 2019, the EV-to-EBITDA ratio is down by approximately 19.43%. (Source: Bloomberg)
Crude Production: The Baker Hughes Rig Count increased to 261 rigs, increasing by 7 rigs from last month’s count of 254 rigs. US production of crude oil increased to 10.700 mb/d in the last week of September compared to August levels of 9.7000 mb/d. (Source: Baker Hughes & EIA)
For performance data current to the most recent month- and quarter-end, please click here
As of 9/30/2020, TC Pipelines (TCP) was a holding in the Global X MLP ETF (MLPA), with a 5.13% weighting and Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.89% weighting. TC Energy (TRP) was a holding in the MLPX, with a 9.43% weighting, Energy Transfer LP (ET) was a holding in the MLPA, with a 9.72% weighting and MLPX, with a 4.49% weighting.
MLPX ETF and MLPA ETF do not have any holding in Chevron (CVX), Noble Midstream Partners (NBLX), and Noble Energy (NBL).