During June, the Alerian MLP Infrastructure Index (AMZI) rebounded from May’s underperformance and was up 1.3% on a total return basis, versus Standard & Poor’s 500 Index, which fell 1.7%. That said, capital market activity somewhat slowed during June, likely due to softer market conditions in May. Pipeline master limited partnerships (MLPs) raised a total of $1 billion in follow-on secondary offerings and roughly $50 million from the initial public offering (IPO) of Compressco Partners (GSJK).
IPOs
Given the amount of announced acquisitions in June, along with a backlog of potential IPOs, capital market activity may likely pick up going forward. Potential IPOs include American Midstream Partners LP (AMID), a gathering and processing partnership; LRR Energy LP (LRE) and Memorial Production Partners LP (MEMP), both exploration and production partnerships; and Oiltanking Partners LP (OILT), a crude and refined products midstream partnership.
Acquisitions
The largest acquisition offers announced in June include Energy Transfer Equity LP’s (ETE) offer to merge with Southern Union Co. (SUG) for nearly $8.9 billion and ETE’s agreement to contribute a 50% interest in Citrus Corp. to Energy Transfer Partners LP (ETP), pursuant to the merger of ETE and SUG. These proposed agreements, as well as the completed acquisition of the Louis Dreyfus Highbridge Energy LLC (LDH) natural gas liquids assets in May for $1.9 billion by ETP and Regency Energy Partners LP (RGNC), provide evidence that MLPs are still active acquirers of both public and private midstream assets.
New projects
Major project announcements in June include Enterprise Product Partners LP’s (EPD) plans to build a sixth NGL fractionator at Mont Belvieu and RGNC’s $450 million Eagle Ford Expansion, which includes the construction of a 400-mile wellhead gathering system, the installation of 125,000 horsepower of compression, and the construction of four gas and condensate export terminals.
INGAA
In late June, the Interstate Natural Gas Association of America (INGAA) released a report conducted by ICF International titled “North American Midstream Infrastructure Through 2035: A Secure Energy Future.” In the next 25 years, more than $250 billion, or roughly $10 billion per year, will need to be spent on natural gas, crude oil, and NGL infrastructure. More than half (or $130 billion) will be spent in the next decade alone.
Of the $250 billion, more than 80% will be spent on the natural gas front. In particular, almost $100 billion of new natural gas transmission mainline will need to be built primarily in the Central, Southwest, and Southeast regions and $70 billion will be spent on gathering lines and laterals to storage, power plants, and processing plants. The remaining 20%, or $46 billion, will need to be spent on crude oil and natural gas liquids infrastructure. More than 66% will be spent on oil transmission mainlines. The report further solidifies the role MLPs will play as the demand for new domestic midstream infrastructure remains strong. For more on this topic, see the INGAA article in this issue.
Emily Wang, a CPA, is a director for Alerian. The Alerian Index Series is used for asset allocation, investment analysis, portfolio hedging and the creation of index-tracking funds. Alerian is widely known for maintaining the leading benchmark for MLP equities: the Alerian MLP Index (AMZ).
Recommended Reading
Pembina Pipeline Enters Ethane-Supply Agreement, Slow Walks LNG Project
2024-02-26 - Canadian midstream company Pembina Pipeline also said it would hold off on new LNG terminal decision in a fourth quarter earnings call.
Midstream Operators See Strong NGL Performance in Q4
2024-02-20 - Export demand drives a record fourth quarter as companies including Enterprise Products Partners, MPLX and Williams look to expand in the NGL market.
Post $7.1B Crestwood Deal, Energy Transfer ‘Ready to Roll’ on M&A—CEO
2024-02-15 - Energy Transfer co-CEO Tom Long said the company is continuing to evaluate deal opportunities following the acquisitions of Lotus and Crestwood Equity Partners in 2023.
Enterprise Gains Deepwater Port License for SPOT Offshore Texas
2024-04-09 - Enterprise Products Partners’ Sea Port Oil Terminal is located approximately 30 nautical miles off Brazoria County, Texas, in 115 ft of water and is capable of loading 2 MMbbl/d of crude oil.
TC Energy's Keystone Oil Pipeline Offline Due to Operational Issues, Sources Say
2024-03-07 - TC Energy's Keystone oil pipeline is offline due to operational issues, cutting off a major conduit of Canadian oil to the U.S.