The Alerian MLP Infrastructure Index (AMZI) was down nearly 6% on a total-return basis in May, versus the S&P 500 Index, which fell 1.1%.
The sector sell-off was attributable to a variety of factors, including an overall energy sell-off largely due to retreating crude oil prices, fund flows tied to April and May’s dividend capture trading, as well as headline risk from potential tax reform on pass-through entities with gross receipts of $50 million or more.
Despite the sell-off, distribution growth in the asset class remained strong during the second quarter. Of the 40 energy MLPs that earn the majority of their cash flow from midstream infrastructure businesses, 26 (65%) increased their distributions versus the previous quarter and 14 (35%) maintained their distributions.
The median distribution increase for the midstream energy infrastructure asset class was 2% on a quarter-over-quarter basis.
During May, the National Association of Publicly Traded Partnerships (NAPTP) hosted the annual NAPTP MLP Conference in Greenwich, Connecticut. Since 2007, the conference has highlighted the build-out opportunities surrounding dry natural gas shale plays such as the Barnett, Haynesville, and Fayetteville.
However, given shifts in producer activity toward high oil- and liquids-rich content, MLP capital investments shifted as well. Partnerships at this year’s conference focused their discussions on the infrastructure necessary to balance and debottleneck crude oil and natural gas liquids (NGL) flows.
During the conference, MLPs including Enbridge Energy Partners LP, Enterprise Products Partners LP, Magellan Midstream Partners LP, Plains All American Pipeline LP, Genesis Energy LP and NuStar Energy LP discussed their partnership’s plans to gather and transport crude supplies from the Bakken, Permian Basin, or Eagle Ford to Cushing, Oklahoma, or further south to refineries along the Gulf Coast.
On the NGL front, MLPs such as Enterprise Products, Kinder Morgan Energy Partners LP, Copano Energy LLC, Oneok Partners LP, DCP Midstream Partners LP and Markwest Energy Partners LP outlined infrastructure growth opportunities in liquids-rich areas, particularly in the Eagle Ford and Marcellus shale.
Many of the outlined crude oil and liquids infrastructure projects are currently seeking capacity commitments. While not all proposed projects will be built, it is clear that MLPs will continue playing a crucial role in addressing shifting domestic energy flows and related infrastructure needs.
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