Seeking Alpha

MLP Monthly Report: September 2019

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Includes: CQP, MLPA, MLPX, MMP, NBL, NBLX, OKE, TGE, WMB
by: Global X ETFs
Summary

Williams Companies and New York-based investment firm Global Infrastructure Partners may be working towards a possible deal for WMB to acquire Noble Midstream Partners LP.

Blackstone Infrastructure Partners offered to buy the remaining shares of Tallgrass Energy LP.

Several debt offerings were issued by midstream companies to take advantage of low rates.

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.

Summary

News:

1) Williams Companies Inc. (NYSE: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 (NYSE:NBLX). Earlier this year, Noble Energy (NYSE: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 (NYSE: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. (NYSE:MMP) issued $500 million of senior notes bearing a coupon of 3.950% due in 2050. ONEOK, Inc. (NYSE:OKE) issued $2 billion of senior notes, and Cheniere Energy Partners, L.P. (NYSEMKT: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)

mlp performance

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 was a holding in the Global X MLP ETF (NYSEARCA:MLPA), with a 3.90% weighting and the Global X MLP and Energy Infrastructure ETF (NYSEARCA:MLPX), with a 0.39% weighting. Magellan Midstream Partners, L.P. was a holding in the MLPA ETF, with an 8.62% weighting and the MLPX ETF, with a 3.38% weighting. ONEOK, Inc. was a holding in the MLPX ETF, with an 8.07% weighting. Williams Companies Inc. was a holding in the MLPX ETF, with a 7.38% weighting. Tallgrass Energy LP 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 and Noble Energy.

Footnotes

1. Asset class representations are as follows, MLPs, Solactive MLP Infrastructure Index; High Yield Bonds, Bloomberg Barclays US Corporate High Yield Index; Preferreds, ICE BofA Merrill Lynch Fixed Rate Preferred Securities Index; Emerging Market Bonds, J.P. Morgan EMBI Global Core Index; Investment Grade Bonds, iBoxx USD Liquid Investment Grade Index;

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

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.

The Solactive MLP & Energy Infrastructure Index: The Solactive MLP & Energy Infrastructure Index is intended to give investors a means of tracking the performance of MLPs and energy infrastructure corporations. Midstream energy infrastructure MLPs and corporations principally own and operate assets used in energy logistics, including, but not limited to, pipelines, storage facilities and other assets used in transporting, storing, gathering, and processing natural gas, natural gas liquids, crude oil or refined products. The index limits its exposure to partnerships in order to comply with applicable tax diversification rules. Securities must be publicly traded in the United States. The index is maintained by Solactive AG.

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 Barclays US Corporate High Yield Index: The Bloomberg Barclays 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 Barclays EM country definition, are excluded.

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

J.P. Morgan EMBI Global Core Index: J.P. Morgan EMBI Global Core Index is a broad, diverse U.S. dollar-denominated emerging markets debt benchmark that tracks the total return of actively traded external debt instruments in emerging market countries.

iBoxx USD Liquid Investment Grade Index: The iBoxx USD Liquid Investment Grade index measures the performance of 600 highly liquid investment grade corporate bonds.

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.

Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Funds' summary and full prospectuses, which may be obtained by calling 1-888-GX-FUND-1 (1-888-493-8631), or by visiting www.globalxfunds.com. Read the prospectus carefully before investing.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.