MLPs, as measured by the Alerian MLP Index (AMZ), ended October down 8.6% on a price basis, and down 8.0% once distributions are considered. The AMZ results underperformed the S&P 500 Index’s 6.8% total return loss for the month. The best performing MLP subsector for October was the Petroleum Pipeline group, while the Propane subsector generated the weakest returns, on average.

For the year through October, the AMZ is down 8.7% on a price basis, resulting in a 2.6% total return loss. This compares to the S&P 500 Index’s 1.4% and 3.0% price and total returns, respectively. The Diversified group has produced the best average total return year-to-date, while the Propane subsector has lagged.

MLP yield spreads, as measured by the AMZ yield relative to the 10-Year U.S. Treasury Bond, widened by 28 basis points (bps) over the month, exiting the period at 519 bps. This compares to the trailing five-year average spread of 485 bps and the average spread since 2000 of approximately 368 bps. The AMZ indicated distribution yield at month-end was 8.3%.

Midstream MLPs and affiliates raised $0.1 billion new marketed equity (common or preferred, excluding at-the-market programs) and $3.0 billion of marketed debt during the month. MLPs and affiliates announced approximately $1.0 billion of asset acquisitions during October.

Spot West Texas Intermediate (WTI) crude oil exited the month at $65.31 per barrel, down 10.8% over the period and 20.1% higher year-over-year. Spot natural gas prices ended October at $3.31 per million British thermal units (MMbtu), up 8.7% over the month and 18.2% higher than October 2017. Natural gas liquids (NGL) pricing at Mont Belvieu exited the month at $30.87 per barrel, 27.1% lower than the end of September and 6.0% lower than the year-ago period.


Third-Quarter Earnings Season. Third-quarter reporting season began in October. Through month-end, 63 midstream entities had announced distributions for the quarter, including 24 distribution increases, one reduction, and 38 distributions that were unchanged from the previous quarter. Through the end of October, 20 sector participants had reported third-quarter financial results. Operating performance has been, on average, in-line with expectations with EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, coming in 0.2% less than consensus estimates and 8.5% higher than the preceding quarter.

Corporate Consolidations and M&A. Three meaningful corporate consolidations or simplifications were announced during October, and one significant simplification was completed during the month. The Antero family announced a simplification transaction in which Antero Midstream GP (AMGP) will acquire Antero Midstream Partners (AM). That is expected to close during the first quarter of 2019, at which time AM’s incentive distribution rights (IDRs) would be eliminated. Additionally, EnLink Midstream announced a simplification plan in which EnLink Midstream, LLC (ENLC) would acquire EnLink Midstream Partners (ENLK) and eliminate ENLK’s IDRs in a transaction also expected to close during the first quarter of 2019. Further, Valero Energy (VLO) announced an agreement to reacquire its daughter MLP, Valero Energy Partners (VLP). Finally, the Energy Transfer family closed the previously announced simplification in which Energy Transfer Equity (ETE) acquired Energy Transfer Partners (ETP) and eliminated IDRs.

Significant Growth Project Announcements. Energy Transfer (ET) announced an open season to solicit shipper commitments to expand its Bakken Pipeline system. Additionally, ET reported that the Federal Energy Regulatory Commission (FERC) granted approval to commence natural gas service on the final laterals needed to complete its Rover Pipeline project. JupiterMLP (Private) announced that it had secured funding to advance the one million barrels per day Jupiter Pipeline to transport high gravity crude oil from the Permian basin to the Port of Brownsville, TX, with expectations for the pipeline to be placed into service late in 2020. Williams announced the receipt of long-term volume commitments to support its Leidy South expansion project. And TransCanada announced plans to proceed with the Coastal GasLink pipeline project to supply gas to LNG Canada, with a planned in-service of 2023.

Chart of the Month

Selected MLP Historical Corrections Measured by the Alerian MLP Index as of 9/30/2018

<strong>Selected MLP Historical Corrections</strong>