Investment Solutions

Energy Infrastructure – SMAP

The United States is producing records amounts of oil, natural gas, and natural gas liquids. All of which are flowing through under-utilized pipeline infrastructure allowing the midstream companies to benefit from operational leverage. The record hydrocarbon production has created an export boom for the industry as well. Demand from emerging markets for refined products has increased activity at export docks along the gulf coast. Crude oil, refined petroleum products, liquefied natural gas, raw natural gas liquids (NGLs), and refined NGLs in the form of ethylene and propylene (the building blocks of all plastics) are all leaving U.S. docks. Companies like Enterprise, Targa, Energy Transfer, Plains All-American, and Magellan are all benefitting from this increased activity. Ethane demand is estimated to be more than double as the petrochemical buildout is completed. This dynamic would have major positive impact to fractionation margins for Enterprise, Targa, Williams, Energy Transfer, and Oneok. We now have two operational LNG Export facilities in the U.S., Cheniere’s Sabine Pass and Dominions Cove Point, which required significant pull on natural gas production and increased pipeline throughput. Mexico has provided another outlet as our southern neighbor requires increased natural gas supply to feed their growing natural gas power generation build out. The five largest positions in our portfolio Energy Transfer, Enterprise, Magellan, Williams, and Targa have built and/or acquired integrated infrastructure assets that can gather hydrocarbons from the well-head and get them on a ship. This is a business model we believe will have growing scarcity value due to limited real estate and a complexity in constructing the necessary infrastructure. The yield in our Energy Infrastructure - SMAP as of June 30, 2018 was 7.2%.

This text is being furnished on a confidential basis and serves as preliminary executive summary for information regarding an investment in ELCO Management Co., Separately Managed Account Programs (SMAP), and may not be used or reproduced for any other purpose. This presentation does not constitute an offer to sell nor a solicitation of an offer to purchase interests in any investment vehicle managed by ELCO Management Co., LLC. All security transactions involve substantial risk of loss. Products may involve above average risk and past performance is not necessarily indicative of future performance. All material is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. Current brokerage services arrangements with Charles Schwab & Co., Inc., Morgan Stanley Smith Barney, Raymond James Asset Management and RBC Dain