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Lessons from Canada for US Midstream Master Limited Partnerships

By Roger S. Conrad on Nov. 24, 2017

In US dollar terms, the Solactive Canadian Midstream Oil & Gas Index has outperformed the Alerian MLP Index by more than 15 percentage points so far in 2017 and almost 25 percentage points since the energy down-cycle began in mid-2014.

(Click graph to enlarge.)
AMZ vs SOCOG

Nine of the 10 Canadian midstream companies in our International Coverage Universe have increased their dividends at least twice since oil prices peaked in 2015. The lone exception, Kinder Morgan Canada (TSX: KML), completed its initial public offering on May 30, 2017.

Equally important, none of these names have cut their payouts since energy prices started to break down in mid-2014—a remarkable feat when you consider the pain that Canadian oil-field service companies and producers have suffered relative to their US peers.

Cross-border transportation constraints, coupled with surging US energy production, have ensured that Canadian upstream operators’ price realizations on crude oil, natural gas and natural gas liquids come at a significant discount to prominent benchmarks.

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