Western Gas and Antero Midstream Underperformed AMLP

Series overview

In this series, we’ll conduct an analysis of four midstream MLP peers that mainly provide crude oil and natural gas gathering, transportation, and storage services. The four peers are midstream MLP subsidiaries of four US upstream c-corps. Western Gas Partners (WES), EQT Midstream Partners (EQM), Rice Midstream Partners (RMP), and Antero Midstream Partners (AM) provide midstream services to their upstream parents and other third-party customers.

Western Gas and Antero Midstream Underperformed AMLP

While the upstream c-corp parents are exposed to fluctuations in energy commodity prices, their midstream subsidiaries mostly operate as toll-road or fee-based businesses with less commodity price exposure. In this series, we’ll analyze the performance value drivers for each of these four MLPs. First, we’ll analyze the performance for their total returns YTD (year-to-date).

Total return performance

Western Gas Partners and Antero Midstream Partners underperformed the Alerian MLP ETF (AMLP). It’s comprised of 23 midstream energy MLPs. They underperformed by 4.14 percentage points and 2.24 percentage points, respectively, in term of the YTD returns. Western Gas Partners and Antero Midstream have returned -16.46% and -14.57%, respectively, while AMLP has returned -12.33% YTD.

Although Antero Midstream has minimal commodity price exposure, its underperformance to AMLP may be due to market mispricing or indirect commodity price exposure. Western Gas Partners has a higher commodity price exposure through its natural gas and NGL (natural gas liquid) midstream businesses like natural gas processing.

At the same time, Rice Midstream Partners and EQT Midstream Partners outperformed AMLP by 14.63 percentage points and 4.66 percentage points, respectively. Rice Midstream Partners and EQT Midstream have returned 2.30% and -7.66% YTD. Together, Western Gas Partners, Antero Midstream, and EQT Midstream account for 1.43% of the Global X MLP & Energy Infrastructure ETF (MLPX).

Indirect commodity price exposure

The earnings of these four MLPs mainly depend on the volumes of gas or oil gathered, compressed, transported, or stored. As crude oil and natural gas prices fall, upstream producers might cut their production. This could result in lower throughput volumes and lower earnings for these MLPs.