Midstream Energy ETF Key | Apr 2024

Midstream Energy ETF Key Takeaways

With US oil prices rising above $80 per barrel in March, sentiment for the energy sector has broadly improved. For midstream, the strengthened macro backdrop complements company-level tailwinds from free cash flow generation, which support ongoing dividend growth and buybacks. As of 28 March, MMLP’s underlying index, AEDW, was yielding 6.5%, and companies with an investment-grade credit rating represented over 91% of the index by weighting.

AEDW rose 6.1% on a net total-return basis in March, roughly in line with the STOXX Europe 600 Oil and Gas Index (SXEP), which was up 6.6% on a total-return basis. Energy stocks rose as the US oil benchmark gained 6.3% in March. Oil prices were supported by incremental geopolitical risk related to Russia and improving global macroeconomic indicators, which are encouraging for demand. AEDW outpaced the 3.2% gain for the S&P 500 in March.

As of 28 March, 89.5% of AEDW constituents by weighting grew dividend payouts within the last year based on dividend announcements for 4Q23 (paid in 1Q24), while 78.5% of AEDW had a buyback authorization in place.

The outlook for midstream remains constructive as companies largely expect moderate EBITDA growth this year, while continuing to focus on free cash flow generation. Strong dividend trends and opportunistic buybacks are expected to continue. While strength in oil has been a tailwind, midstream is well positioned to perform defensively thanks to its fee-based business models if oil prices retreat.

Sources available upon request. Data as of 31/03/2024. Please remember that all performance figures are showing net data. Past performance is not indicative of future performance, and when you invest in ETFs your capital is at risk.

Constituent News

MPLX (MPLX, 10.4% Weight) acquired natural gas assets in the Utica portion of the Appalachian Basin in Ohio from Summit Midstream Partners (SMLP, not in AEDW) for $625 million.

Enbridge Inc. (ENB, 9.1% Weight) extended its guidance through 2026 for 8% growth in adjusted EBITDA at the midpoint and reaffirmed its post-2026 adjusted EBITDA growth of around 5%. They acquired a 19% interest in a Permian natural gas joint venture with MPLX (MPLX, 10.4% Weight) and WhiteWater Midstream (not in AEDW), contributing a majority interest in the Rio Bravo pipeline and additional cash considerations.

TC Energy (TRP CN, 9.0% Weight) announced divestitures in March, in line with its strategic priorities to divest CAD 3 billion in assets. TRP announced a sale of its interest in Portland Natural Gas Transmission System to BlackRock and an agreement to sell its interest in Prince Rupert Gas Transmission project, a proposed natural gas pipeline to supply liquefied natural gas facilities in coastal British Columbia, to Nisga’a Nation and Western LNG.

Enterprise Products Partners (EPD, 10.1% Weight) began service at the first phase of its Texas Western Products system at the new Permian terminal, with the remainder of the system expected to be in service in the first half of 2024.

Hess Midstream (HESM, 0.6% Weight) repurchased $100 million of sponsor units held by affiliates of Hess Corporation and Global Infrastructure Partners.

Midstream Energy ETF Performance
As of 31.03.2024

1M3M6MYTD12M3YSI
Alerian Midstream Energy Dividend UCITS ETF6.01%10.44%16.53%10.44%25.01%68.52%128.12%
Alerian Midstream Energy Dividend Index (NTR)6.07%10.46%16.52%10.46%24.58%65.85%122.02%

 

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/03/2024

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs, your capital is at risk.

This report was written by, and is the opinion of VettaFi, the index provider of the Alerian Midstream Energy Dividend Index, the underlying index of MMLP. VettaFi does not issue, sponsor, endorse, sell, or promote MMLP.