Midstream has continued to rally on strong demand and energy prices this year, with advisors expecting energy to be the trend of the year, but today might be an opportunity to buy in while the price is a little below its recent highs.
In the wake of broader equity market volatility last week, the Alerian MLP ETF (AMLP) gained 6.56% on positive midstream earnings reports and growing free cash flow for the space, according to ALPS Weekly ETF Spotlight.
The strongest performance was seen in AMLP’s Liquefaction segment as the lone name in the category reported earnings. According to ALPS, the Gathering & Processing segment also saw large gains last week, benefitting from commodity price strength and elevated natural gas demand amidst a cold snap across most of the U.S.
Liquefaction holding, Cheniere Energy Partners LP (CQP, 4.67% weight), gained 6.95% last week after raising its quarterly distribution by 1.4%. The liquefied natural gas (LNG) producer’s increased output from its Sabine Pass LNG export terminal has led to the U.S. being the world’s top exporter of LNG for the second month in a row, with U.S. LNG exports hitting a record 7.3 million tons in January, per Bloomberg.
Plains All American Pipeline LP (PAA, 10.83% weight), a petroleum transportation MLP with significant Permian infrastructure, was the largest portfolio gainer last week, rising nearly 10% after multiple analysts cited faster than anticipated Permian crude supply growth in late 2021, according to ALPS.
MLP bellwethers, Enterprise Products Partners (EPD, 9.60% weight), Magellan Midstream Partners (MMP, 9.06% weight), and MPLX LP (MPLX, 9.70% weight) last week reported solid year-over-year EBITDA growth and free cash flow generation for Q4. Results for all three beat analysts’ expectations and were complemented by ongoing buyback activity in Q4.
Jim Teague, co-CEO of Enterprise, said the current energy supply disruptions from the pandemic, along with geopolitical tensions in Europe, may lead to greater long-term international demand for U.S. crude oil, natural gas, and NGLs as a source of reliable supply to mitigate high energy prices.
While the MLPs in AMLP do not have much direct commodity exposure due to their fee-based contracts to transport and store crude oil and natural gas, the increased global demand for natural gas propelled the liquefaction and gathering & processing segments in AMLP higher last week.
AMLP is down a little over 2% over a five-day period, and with promising growth ahead, now may be the right time to allocate more funds to the popular ETF.
*All weight in AMLP as of February 4.
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