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CBRE GLOBAL INVESTORS

CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers providing real estate and infrastructure investment solutions to over 500 clients worldwide.

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CBRE Global Investors is the investment management division of CBRE Group, Inc. the world’s premier commercial real estate services and investment firm.  The company’s shares trade on the New York Stock Exchange under the symbol “CBRE.”

REAL ESTATE SERVICES
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Hinds Howard

Principal, Associate Portfolio Manager, Infrastructure

Week Thoughts: Stocks Up, Midstream Down

MLPs staged a comeback effort late in the week (+3.7% Wednesday to Friday), but finished down vs. last week, and well below the S&P 500’s 3.3% gain.  Utilities were also negative, as it seemed a lower for longer rate environment and looser inflation targets was bullish growth stocks over income ones this week.  Apparently, midstream fell into the income category rather than the energy category this week. 

The FTSE Infrastructure index was positive, with transportation stocks globally able to overcome that weakness in utilities and midstream.  Airport stocks in Europe traded particularly well this week.

There were a few interesting stock price moves this week, but its hard to read much into those this late into August.  The gas over oil midstream or Marcellus vs. Permian and Bakken trade seems to have gotten a little ahead of itself in recent weeks and reversed a bit this week. 

There is only one more day left in August, and barring a very bad Monday, midstream should finish the month positive across the AMNA and AMZ.  A positive August would break a two-month losing streak, which would be nice.  August would also represent large underperformance relative to the S&P 500 and commodity prices, which isn’t so great.  But the last two days of positive performance have been nice.

Rather than ramble further, I’ll cut it off here and go enjoy the weekend, I suggest you do the same.

Winners & Losers

MLPs

When MLPs traded better later in the week, it was clear there was some rotation among names.  The trade late in the week favored liquids-focused names over gas-focused names.   Stocks like NGL, PAA, PSXP and NS traded well, while TCP and CQP were sold.  ENBL was the biggest mover, the only midstream stock to trade up or down 10%+ this week, on no news, other than higher natural gas prices, which benefit producers in the Haynesville where ENBL has assets.

DKL and CQP went from top 5 to bottom 5 week over week, maybe a sign of shifting positioning among investors after announced transactions for both.  NBLX went from bottom 5 to top 5 week over week, but remains among the biggest losers YTD.  DKL and CQP remain in the top 5 for the year, along with a few other smaller, more retail owned MLPs.

Midstream Corporations

OKE and ENLC were positive outliers this week.  Both have assets that could be geographically compared with ENBL, the leading MLP this week, which may be a sign of some change in Mid-Con sentiment, or it could be just coincidence.  LNG likewise had a strong week relative to peers.  AM’s bubble was burst a bit this week, although I did see several articles noting AM’s popularity among Robinhood customers.

OKE went from worst last week to first this week, while AM went from first to worst.  TRGP and ETRN were consistent at second and third worst both weeks.  KMI outperformed WMB for a second straight week but has plenty of ground to make up on YTD returns.  On the YTD leaderboard, LNG moved up to the third sport, while there wasn’t much change among the biggest losers.

Canadian Midstream

Interesting to see Keyera at the top of the Canadian midstream group, when it surfaced Thursday that Keyera was experiencing an unplanned outage at its Wapiti Gas Plant.  In general, the dominant trade this week of liquids names over gas names extended into Canada (if you squint), with IPL and ENB outperforming TRP.

The big move this week was between TRP and ENB.  TRP has consistently outperformed ENB in recent months, so it will be interesting to watch and see if this week’s counter trend move was the turning point or just an anomaly.  On the YTD leaderboard, TRP gave up the top spot to GEI.  Among the losers, Keyera pulled away from Pembina a bit after leapfrogging Pembina for 4th place last week.

News of the (Midstream) World

Light news week, although the CQP transaction among infrastructure behemoths was noteworthy.  Eyebrow raising to see big private companies taking limited partner stakes in an MLP with IDRs and limited growth after the current construction phase.  We see infrastructure private equity looking to the public markets to find opportunities, which speaks to the scarcity of quality midstream assets available in the private market and also to the discounted valuations available in the public market.

Capital Markets

  • Gibson Energy (GEI-CA) announced initiation of a normal course issuer bid to be in effect for the next 12 months for up to 11.8mm common shares (press release)
    • The NCIB covers 10% of the float of the company, which could be purchased and canceled during the next year

M&A / Growth Projects

  • BX CQP SuperHoldCo Holdings, BX CQP Common Holdco Holdings and BX Rockies Platform Co Holdings agree to sell all LLC interest in BX CQP Target Holdco (filing)
    • This essentially means that the above legacy Blackstone funds sold their CQP holdings to another Blackstone Infrastructure entity (50.01%) and a Brookfield Infrastructure entity (49.99%)
    • The sale valued the securities at approximately $6.8bn
    • Blackstone originally invested $1.25bn in convertible securities in CQP in 2013
  • Kinder Morgan (KMI) announced commercial in-service of final train at Elba Island LNG facility (press release)
    • This marks the completion of the $2bn project to add export capability to the Elba Island LNG facility