MLP Monthly Report: January 2019
The January MLP Monthly Report can be found here offering insights on MLP industry news, the asset class’s performance, yields, valuations, and fundamental drivers.
1) Enterprise Products Partners L.P. (EPD) re-purchased nearly $31 million of common units under its repurchase program from 1998. With this buyback, EPD repurchased all of the remaining common units available under the 20-year old repurchase program.
2) The Organization of Petroleum Exporting Countries (OPEC) and its oil-producing allies, including Russia, struck a deal to cut oil production to prop up prices. The cartel and its allies will jointly take 1.2 million barrels off the market per day for the first six months of 2019. Saudi Arabia, OPEC’s largest producer, will account for the biggest cut, followed by Russia. However, Iran (OPEC’s third-largest producer), along with Venezuela and Libya, have been granted exemptions by OPEC.
3) On January 23, 2019, EnLink Midstream Partners, LP (ENLK) unit holders will vote on the previously announced acquisition of ENLK by its C-Corp general partner, EnLink Midstream (ENLC). If voted upon successfully, the simplification transaction is expected to close in late January 2019.
Sources: Enterprise Products Partners L.P., CNBC, The New York Times, Financial Times, EnLink Midstream, LLC.
Performance: Midstream MLPs, as measured by the Solactive MLP Infrastructure Index, fell by -10.0% on broad market weakness and lower oil prices. The index is down -17.1% since last December. (Source: Bloomberg)
Yield: The current yield on MLPs stands at 9.24%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (7.95%), Emerging Market Bonds (6.97%), Fixed Rate Preferreds (6.20%), and Investment Grade Bonds (4.50%).1 MLP yield spreads versus 10-year Treasuries currently stand at 6.30%, higher than the long-term average of 4.40%.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, fell -5.20% last month. Since December 2017, the EV-to-EBITDA ratio has fallen by approximately -10.14%. (Source: Bloomberg).
Crude Production: The Baker Hughes Rig Count rose last month to 1083 rigs, rising by 7 rigs from last month’s count of 1076 rigs. The rig count has more than doubled since its recent low point in May 2016 of 404 rigs. US production of crude oil held flat at 11.700 mb/d in the last week of December compared to November. (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 12/31/2018, Enterprise Products Partners L.P. (EPD) was a holding in the Global X MLP and Energy Infrastructure ETF (MLPX), with a 4.64% weighting and the Global X MLP ETF (MLPA) with an 11.14% weighting. EnLink Midstream Partners, LP (ENLK) was a holding in the MLPX ETF, with a 0.36% weighting and the MLPA ETF with a 3.40% weighting. EnLink Midstream, LLC (ENLC) was a holding in the MLPX ETF, with a 1.69% weighting.