The February MLP Monthly Report can be found here offering insights on MLP industry news, the asset class’s performance, yields, valuations, and fundamental drivers. The latest quarterly MLP Insights piece providing analysis into the midstream space can be found here, as well.

Summary

News:

1. Brent crude oil prices touched a seven-year high of $90 as tight supplies and escalating tensions between Russia and Ukraine heightened concerns about an already tight supply outlook. This increases the risk that supplies could be affected globally as Russia is one of the world’s largest oil and gas exporters.
2. Crestwood Equity Partners LP (CEQP) completed its acquisition of Oasis Midstream Partners LP (OMP), allowing Crestwood to enhance its scale and expand operations in the Williston and Delaware Basins. The combined entity is expected to generate approximately $45 million in operational and commercial synergies, increasing financial strength and flexibility.
3. In March, OPEC+ agreed to maintain its existing plan of raising oil output by 400,000 barrels per day (bpd). OPEC+ continued with its policy of unwinding record supply cuts of roughly 10 million bpd despite rising oil prices, showing OPEC+ continues to take a conservative approach to raising production.

Sources: Reuters, Crestwood Equity Partners LP (CEQP), CNBC.

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, increased 10.74% last month. The index increased by 47.23% since last January. (Source: Bloomberg).

Yield: The current yield on MLPs stands at 7.84%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.53%), Emerging Market Bonds (4.77%), Fixed Rate Preferreds (4.54%), and Investment Grade Bonds (2.81%).¹ MLP yield spreads versus 10-year Treasuries currently stand at 5.64%, lower than the long-term average of 5.76%.² (Sources: Bloomberg and Federal Reserve).

Valuations: The Enterprise Value to EBITDA ratio (EV-to-EBITDA), which seeks to provide more color on the valuations of MLPs, increased by 0.01% last month. Since January 2021, the EV-to-EBITDA ratio is down by approximately 0.79%. (Source: Bloomberg).

Crude Production: The Baker Hughes Rig Count increased to 610 rigs, increasing by 24 rigs from last month’s count of 586 rigs. US production of crude oil decreased to 11.500 mb/d in the last week of January compared to December levels of 11.800 mb/d. (Source: Baker Hughes & EIA).

For performance data current to the most recent month- and quarter-end, please click here.

As of 01/31/2022, Crestwood Equity Partners LP (CEQP) was a holding in the Global X MLPA ETF (MLPA) with a 4.38% weighting. Oasis Midstream Partners LP (OMP) was a holding in the Global X MLPA ETF (MLPA) with a 0.95% weighting.

Footnotes

Definitions:

Solactive MLP Infrastructure Index: The Solactive MLP Infrastructure Index is intended to give investors a means of tracking the performance of the energy infrastructure MLP asset class in the United States. The index is composed of Midstream MLPs engaged in the transportation, storage, and processing of natural resources.

S&P MLP Index: S&P MLP Index provides investors with exposure to the leading partnerships that trade on the NYSE and NASDAQ.  The index includes both master limited partnerships (MLPs) and publicly traded limited liability companies (LLCs), which have a similar legal structure to MLPs and share the same tax benefits

Bloomberg US Corporate High Yield Total Return Index: The Bloomberg US Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Bloomberg EM country definition, are excluded.

ICE BofA Fixed Rate Preferred Securities Index: The ICE BofA Fixed Rate Preferred Securities Index tracks the performance of fixed rate US dollar denominated preferred securities issued in the US domestic market.

Bloomberg EM USD Aggregate Total Return Index: The Bloomberg Emerging Markets Hard Currency Aggregate Index is a flagship hard currency Emerging Markets debt benchmark that includes USD-denominated debt from sovereign, quasi-sovereign, and corporate EM issuers.

Bloomberg US Corporate Total Return Index: The Bloomberg US Corporate Total Return Value Unhedged Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD denominated securities publicly issued by US and non-US industrial, utility and financial issuers.

Crude Oil: Measured based on the Generic 1st ‘CL’ Future, which is the nearest crude oil future to expiration.

EBITDA: Earnings before interest, tax, depreciation and amortization (EBITDA) is a measure of a company’s operating performance. Essentially, it’s a way to evaluate a company’s performance without having to factor in financing decisions, accounting decisions or tax environments.

Average Spread: Average spread is the average of the excess of the MLPs yield over the 10 year treasuries yield.

Enterprise Value (EV): EV is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization.

Endnotes:

1. Asset class representations are as follows, MLPs, Solactive MLP Infrastructure Index; High Yield Bonds, Bloomberg US Corporate High Yield Total Return Index; Preferreds, ICE BofA Fixed Rate Preferred Securities Index; Emerging Market Bonds, Bloomberg EM USD Aggregate Total Return Index; REITs, FTSE NAREIT All Equity REITS Index; Investment Grade Bonds, Bloomberg US Corporate Total Return Value Unhedged Index; Equities, S&P 500 Index; and Crude Oil, Generic 1st ‘CL’ Future.

2. MLPs are represented by the S&P MLP Index.