MLP Monthly Report: March 2022

The March 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 hit a 13-year high of $130 per barrel as the US and its allies consider a ban on Russian oil and natural gas, intending to isolate Russia from the global economy amid the ongoing Russia-Ukraine war. The West has already sanctioned parts of Russia’s economy but has so far continued with energy imports.
  2. OPEC+ decided to stick to its plan of raising oil output by 400,000 barrels per day (bpd) in April. OPEC+ stated that the current volatility in oil prices was due to geopolitical developments and not changes in market fundamentals. The group still has around 2.6 million bpd to unwind by the end of September 2022, while the demand for oil is expected to rebound sharply as the world recovers from the pandemic.
  3. Enterprise Product Partners (EPD) has completed its $3.25 billion acquisition of Navitas Midstream Partners, LLC. The acquisition gives a footing to EPD in the Midland Basin of the Permian Basin in natural gas gathering, treating and processing. Navitas’ assets comprise over a billion cubic feet per day of cryogenic natural gas processing capacity and nearly 1,750 miles of pipelines.

Sources: CNBC, Reuters, Enterprise Product Partners (EPD), Businesswire.

Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, increased 3.91% last month. The index increased by 41.00% since last February. (Source: Bloomberg.)

Yield: The current yield on MLPs stands at 7.30%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.84%), Emerging Market Bonds (5.65%), Fixed Rate Preferreds (4.87%) and Investment Grade Bonds (3.10%).1 MLP yield spreads versus 10-year Treasuries currently stand at 5.42%, lower than the long-term average of 5.76%.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, increased by 4.88% last month. Since February 2021, the EV-to-EBITDA ratio is up by approximately 0.13%. (Source: Bloomberg.)

Crude Production: The Baker Hughes Rig Count increased to 650 rigs, increasing by 40 rigs from last month’s count of 610 rigs. US production of crude oil increased to 11.600 mb/d in the last week of February compared to January levels of 11.500 mb/d. (Source: Baker Hughes & EIA.)

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

As of Feb. 28, 2022, Enterprise Product Partners (EPD) was a holding in the Global X MLPA ETF (MLPA) with a 10.06% weighting and MLPX ETF with a 4.44% weighting. MLPA ETF and MLPX ETF do not have any holdings in Navitas Midstream Partners LLC.

End Notes:

  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.

Disclaimer: Investing involves risk, including the possible loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from ...

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