MLP Monthly Report: September 2019
The September MLP Monthly Report can be found here offering insights on MLP industry news, the asset class’s performance, yields, valuations, and fundamental drivers.
1) Williams Companies Inc. (WMB) and New York-based investment firm Global Infrastructure Partners may be working towards a possible deal for WMB to acquire Noble Midstream Partners LP (NBLX). Earlier this year, Noble Energy (NBL) stated it was reviewing strategic opportunities with respect to its investment in NBLX.
2) Blackstone Infrastructure Partners offered to buy the remaining shares of Tallgrass Energy LP (TGE) for $19.50 per share, a 36% premium to last traded price. Blackstone Infrastructure Partners, along with its partners and affiliates, currently own a 44.2% stake in Tallgrass.
3) Several debt offerings were issued by midstream companies to take advantage of low rates. Amongst them, Magellan Midstream Partners, L.P. (MMP) issued $500 million of senior notes bearing a coupon of 3.950% due in 2050. ONEOK, Inc. (OKE) issued $2 billion of senior notes, and Cheniere Energy Partners, L.P. (CQP) also plans to offer $1 billion of senior notes, due in 2029.
Sources: Bloomberg, Business Journal, Reuters, PR Newswire, Magellan Midstream Partners L.P., Cheniere Partners.
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell by -5.7% last month. The index is down by -10.44% since last August. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 8.32%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.72%), Emerging Market Bonds (5.19%), Fixed Rate Preferreds (5.22%), and Investment Grade Bonds (3.00%).1 MLP yield spreads versus 10-year Treasuries currently stand at 6.74%, higher than the long-term average of 4.51%.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, decreased by -0.1% last month. Since August 2018, the EV-to-EBITDA ratio has fallen by approximately -25%. (Source: Bloomberg).
Crude Production: The Baker Hughes Rig Count fell last month to 904 rigs, falling by 42 rigs from last month’s count of 946 rigs. The rig count has more than doubled since its recent low point in May 2016 of 404 rigs. US production of crude oil increased to 12.400 mb/d in the last week of August compared to 12.200 mb/d the last week in July. (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 08/31/2019, Cheniere Energy Partners (CQP) was a holding in the Global X MLP ETF (MLPA), with a 3.90% weighting and the Global X MLP and Energy Infrastructure ETF (MLPX), with a 0.39% weighting. Magellan Midstream Partners, L.P. (MMP) was a holding in the MLPA ETF, with an 8.62% weighting and the MLPX ETF, with a 3.38% weighting. ONEOK, Inc. (OKE) was a holding in the MLPX ETF, with an 8.07% weighting. Williams Companies Inc. (WMB) was a holding in the MLPX ETF, with a 7.38% weighting. Tallgrass Energy LP (TGE) was a holding in the MLPX ETF, with a 3.38% weighting.
MLPX ETF and MLPA ETF do not have any holding in Noble Midstream Partners LP (NBLX) and Noble Energy (NBL).