Triangles background

Hinds Howard

Principal, Associate Portfolio Manager, Infrastructure

Week Thoughts: Midstream, The Final Season

With the market taking a very well-publicized breather this week, midstream followed the market and oil prices lower.  MLPs were down each day this week and finished down 4.7%.  Broader midstream (the AMNA) held up slightly better.  It was a week to forget ahead of a short week where at least we can take comfort knowing MLPs can’t drop 5 days if there are only 4 trading days.

Utilities were positive, infrastructure was nearly flat, showing signs of the defensive attributes investors have come to expect from them.  Midstream, on the other hand, continues to take its cues from energy stocks and commodity prices. 

The Office, From Home

This extended summer break is finally ending in my house, which is where we are all going to stay, but school is starting.  My family (not always including me) covered a lot of ground catching up on popular sit coms this summer.  They watched from start to finish the following series:

  • Modern Family
  • Frasier
  • Parks & Recreation – everyone’s favorite
  • The Good Place – bizarre
  • The Goldbergs – this one I enjoyed quite a bit despite never seeing it when it aired originally
  • How I Met Your Mother – stretched the limits of appropriate for my middle schoolers
  • The Office – wrapped up this weekend

The weird thing about having these shows available on streaming services is that all the seasons are there.  Even the seasons that aired long after I stopped watching, or well after the shows “jumped the shark” so to speak.  My kids don’t have any idea that the last few seasons were basically garbage, and they get really focused on how these largely irrelevant seasons wind down each show.  

Binging shows also tends to make the focus on the larger ongoing relationships (Jim and Pam, Barney and Robin, etc.) of the characters rather than the situation of any single episode.  I believe that’s why Seinfeld hasn’t really caught on in my house (although “The Strike” featuring Festivus was a hit).  That’s also why I will probably have to overhear them going through all 10 seasons of Friends soon.

I sat in for the finale of The Office this weekend.  The more famous actors Steve Carrell and Ed Helms had to be brought back in for cameos (Carrell’s was especially short) because they’d been long gone.

How Does the Series End?

Bringing it back to midstream, the last few seasons for MLPs haven’t been like the classic ones we all fell in love with.  Many of the more famous players exited a while ago (KMP in 2015, OKS in 2017, WPZ and SEP in 2018, BPL and ANDX in 2019).  We’ve had a few cameos of strong short-term performance, without follow through.

But here we are, still eagerly watching this sector that many have stopped paying attention to or long given up on.  We are watching to see who ends up with who, how it all ends, or to see if they can recapture some of the old magic.  It could happen.

Monthly Status Update: Signs of Life?

While it was an ugly week, MLPs were slightly positive in August, including distributions, which was better than utilities, but it was substantially worse than stocks broadly.  S&P 500 was up 7% in August and 2 months into 3Q is up 12.9%.

Looking at Septembers over the years, there hasn’t been much of a trend.  It was the worst month of the year in 2015 and 2008.  It was the best of the year in 1998 and 2004, but not recently.  Median monthly return since 1996 across all months has been 1.1%, September median return is 0.9%, so it’s a pretty average month usually.  Median monthly return for MLPs in 2020 is -4.6%, which is a reasonable guess for what this September could offer.

AMNA More August in August

Midstream more broadly (AMNA) had a better month than MLPs, is positive for the 3Q so far and is down 28.7% YTD.  Strength from large corporations in the U.S. (WMB, LNG) and Canada (TRP, ENB) pushed AMNA past the MLP Index.  The divergence continued this week, which seems likely to continue without another big move in oil prices to spark further interest in the more commodity sensitive MLP group.

Winners & Losers


There were a few winners among MLPs this week, including two positive stocks that are not heavily owned by institutions.  PSXP and DKL outperformed, both bouncing back from weakness last week.  NGL’s press release of additional acreage dedications didn’t helped much this week.

ENBL, NGL and ARLP went from top 5 last week to bottom 5 this week.  On the YTD leaderboard, EVA dropped into second place and CQP dropped out of the top 5.  PAA showed some resilience this week and climbed a spot in the bottom 5, even with a slightly negative week overall.  PAA remains a heavily discussed and debated MLP as many struggle with how it can continue to trade so poorly despite very low valuation.

Midstream Corporations

Within midstream corporations this week, the range of outcomes was wide, but all stocks were down.  Cheniere led the group after its facility on the Gulf Coast came through the hurricane unscathed.  PAGP made a rare appearance near the top.  Other winners included HESM, WMB and ETRN, which have been consistent outperformers this year.  ETRN received a key regulatory opinion Friday that helped it reverse some losses.

The bottom 5 names were mostly what you’d expect to see in a week when oil price dropped substantially.  AM has struggled for a couple of weeks now, which may have something to do with how its recent popularity was helped by heavy retail buying that may have taken a hit with the weakness in technology stocks.

Week over week, AM and TRGP repeated in the bottom 5.  LNG and HESM repeated in the top 5.  On the YTD leaderboard, HESM hopped ETRN, but otherwise the order was stagnant and AM dropped back into negative territory.

Canadian Midstream

Canadian midstream held up better overall, but the largest stocks were the worst performers.  There were two positive stocks, however, including IPL which experienced a pipeline outage.

TRP repeated at the bottom of the group this week after outperforming for a few months.  No changes on the YTD leaderboard order.



News of the (Midstream) World

Light news flow week as expected, but there were some capital markets filings from marginally relevant companies.  Expect news to pick up starting next week.

Capital Markets

  • Knot Offshore (KNOP) files $750mm mixed shelf (filing)
    • Registered 8.6mm shares for selling holder Knutsen NYK Offshore Tankers
  • Floating storage & regasification unit (FSRU) operator Hygo Energy Transition, Ltd. files initial registration statement for IPO of up to $100mm (filing)
    • Hygo is developing an integrated LNG platform in Brazil that includes an FSRU unit, a natural gas power plant and pipeline interconnections

M&A / Growth Projects

  • Phillips 66 Partners (PSXP) announced open season for Gray Oak Pipeline (press release)
  • NGL Energy (NGL) announced an extension of an existing customer agreement to dedicate acreage to NGL for produced water and disposal in the Delaware Basin (press release)
    • Agreement adds 22,000 acres to the existing 100,000 acres


  • Keyera (KEY-CA) announced CEO David Smith plans to retire at year end 2020 (press release)
    • President and Chief Commercial Officer Dean Setoguchi will become President and CEO