Midstream Energy ETF Report | March 2024

Midstream Energy ETF Key Takeaways

Energy infrastructure companies finished reporting 2023 earnings in February, showing free cash flow generation and investor returns that can be expected to continue in 2024. MMLP holdings continue to show commitment to returning cash to investors by growing dividends and repurchasing equity. As of 29 February, MMLP’s underlying index, AEDW, was yielding 6.82%, and companies with an investment-grade credit rating represented over 91% of the index by weighting.

AEDW rose 2.7% on a net total-return basis in February, outperforming the STOXX Europe 600 Oil and Gas Index (SXEP), which was down 1.5% on a total-return basis. AEDW lagged the US energy benchmark slightly, the Energy Select Sector Index (IXE), which was up 3.2% on a total-return basis in February.

As of 29 February, 89.2% of AEDW constituents by weighting grew dividend payouts based on dividend announcements for 4Q23 (paid in 1Q23) relative to 4Q22, while 77.9% of AEDW had a buyback authorization in place.

In addition to 2023 earnings, MMLP holdings also provided financial guidance for 2024. Energy infrastructure companies are expected to see moderate year-over-year growth in EBITDA in 2024, with continued dividend increases anticipated as well.

US Oil and natural gas prices continued to be volatile in February, with oil gaining 3.2% and natural gas falling 11.4% for the month. Energy infrastructure’s fee-based business models tend to insulate companies from commodity price movements. Midstream’s defensive qualities, including stable cash flows and healthy yields, can be beneficial during periods of energy commodity price volatility.

Constituent News

Energy Transfer (ET, 10.3% Weight) provided 2024 guidance with its 4Q23 earnings results, targeting a 7% increase in Adjusted EBITDA at the midpoint.

Enterprise Products Partners (EPD, 10.0% Weight) acquired ownership interest in the Whitethorn crude oil pipeline, the EF78 natural gas liquids (NGL) plants, and the Panola NGL pipeline in Texas from WES for a combined $400 million.

Enbridge Inc (ENB, 9.2% Weight) grew its dividend 3.1% for 4Q23 compared to 3Q23 and reaffirmed its 2024 guidance for modest Adjusted EBITDA growth.

ONEOK (OKE, 7.7%) provided 2024 guidance in its 2023 earnings, targeting $6.1 billion in Adjusted EBITDA at the midpoint or approximately 16% growth.

Williams Companies (WMB, 7.3% Weight) provided 2024 and 2025 Adjusted EBITDA guidance, expecting 5-year CAGR of 8% from 2020.

Western Midstream Partners (WES, 3.3% Weight) announced guidance for 2024 expecting around 10% growth in Adjusted EBITDA and plans to recommend to its board a 52% increase to its base distribution for 1Q24.

Targa Resources (TRGP, 1.7% Weight) reiterated its intention to recommend an increase to its dividend by 50% for 1Q23.

EnLink Midstream (ENLC, 0.7% Weight) reported in its 2023 earnings that it repurchased $72 million in equity in the fourth quarter of 2023, bringing its full-year 2023 equity buybacks to $235 million. ENLC reauthorized its $200 million share repurchase program for 2024.

Sources available upon request. Data as of 29/02/2024. 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.

 

Midstream Energy ETF Performance
As of 29.02.2024

1M3M6MYTD12M3YSI
Alerian Midstream Energy Dividend UCITS ETF2.73%1.55%8.48%4.18%15.56%69.65%112.36%
Alerian Midstream Energy Dividend Index (NTR)2.65%2.92%9.91%4.13%16.63%69.14%109.31%

 

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 29/02/2024

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.