MLPs, as measured by the Alerian MLP Index (AMZ), ended September down 1.6% on a price basis, and once distributions are considered. The AMZ results underperformed the S&P 500 Index’s 0.6% total return for the month. The best performing MLP subsector for September was the Marine group, while the Compression subsector generated the weakest returns, on average.

For the year through September, the AMZ is down 0.1% on a price basis, resulting in a 5.9% total return gain. This compares to the S&P 500 Index’s 9.0% and 10.6% price and total returns, respectively. The Compression 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, narrowed by 125 basis points (bps) over the month, exiting the period at 490 bps. This compares to the trailing five-year average spread of 482 bps and the average spread since 2000 of approximately 368 bps. The AMZ indicated distribution yield at month-end was 8.0%.

Midstream MLPs and affiliates raised no new marketed equity (common or preferred, excluding at-the-market programs) and $1.6 billion of marketed debt during the month. MLPs and affiliates announced approximately $0.5 billion of asset acquisitions during September.

Spot West Texas Intermediate (WTI) crude oil exited the month at $73.25 per barrel, up 4.9% over the period and 41.8% higher year-over-year. Spot natural gas prices ended September at $2.99 per million British thermal units (MMbtu), up 1.0% over the month and 3.6% higher than September 2017. Natural gas liquids (NGL) pricing at Mont Belvieu exited the month at $41.26 per barrel, 8.4% higher than the end of August and 31.9% higher than the year-ago period.


Corporate Consolidations and M&A. Enbridge announced improved pricing for its proposed acquisitions of its subsidiary companies including Enbridge Energy Partners (EEP), Enbridge Energy Management (EEQ), and Enbridge Income Fund Holdings (ENF CN). Additionally, Dominion Energy (D) announced a proposal to acquire its daughter MLP, Dominion Energy Midstream Partners (DM), citing “continued weakness in MLP capital markets combined with the prolonged disruption in Dominion Energy Midstream's (DM) common unit price since the March 15 Federal Energy Regulatory Commission policy revision [as] key factors that led to this decision.” Finally, funds associated with private equity firm ArcLight Capital Partners, proposed the acquisition of American Midstream Partners (AMID). Arclight currently owns AMID’s general partner interests as well as approximately 28% of the outstanding AMID units.

Significant Growth Project Announcements. Enterprise Products Partners announced that it had begun construction of a new NGL fractionator at Mont Belvieu, TX, with capacity of 150,000 barrels per day (bbls/d), giving Enterprise 905,000 bbls/d of fractionation capability in the Mont Belvieu area, and approximately 1.4 million bbls/d companywide. The fractionator is scheduled to begin service in the first quarter of 2020. EPD also announced that construction is under way to increase loading capacity for liquefied petroleum gas (LPG), primarily propane and butane, at the Enterprise Hydrocarbon Terminal (EHT) by 175,000 bbls/d. ONEOK (OKE) announced an expansion of its West Texas LPG system supported by long-term dedicated NGL production from six third-party natural gas processing plants in the Permian Basin that are expected to produce up to 60,000 bbls/d of NGLs. Additionally, OKE also announced plans to construct a new fractionator at Mont Belvieu, as well as a new natural gas processing facility in North Dakota, and an extension and expansion of its Arbuckle II NGL pipeline in Oklahoma.

Major Project Updates.Kinder Morgan (KMI) and EagleClaw (private) announced final investment decision to move forward with the two billion cubic feet per day (Bcf/d) Permian Highway pipeline moving natural gas from the Permian Basin to the Gulf Coast near Houston, TX. A consortium that includes Energy Transfer Partners (ETP), Magellan Midstream Partners (MMP), MPLX (MPLX), and Delek US Holdings (DK) announced that they have received sufficient commitments to proceed with plans to construct a new 30-inch pipeline to transport crude oil from the Permian Basin to the Texas Gulf Coast. Williams (WMB) reported that the 1.7 Bcf/d Atlantic Sunrise pipeline project achieved mechanical completion and was awaiting final approval from the Federal Energy Regulatory Commission (FERC).

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