SALIENT MIDSTREAM & MLP FUND ANNOUNCES UNAUDITED NET ASSET VALUE AS OF DECEMBER 31, 2021

HOUSTON, Jan. 6, 2022 /PRNewswire/ -- Salient Midstream & MLP Fund (the "Fund") (NYSE: SMM) provided today a summary of unaudited statement of assets and liabilities and announced Net Asset Value (NAV) as of December 31, 2021.

On December 31, 2021, the Fund's total assets were $187.0 million and the NAV per share was $7.48. On December 31, 2021, the closing share price of the Fund was $6.74, which was trading at a 9.89% discount to the NAV.¹ The Fund's NAV and market price total returns for the month of December were -0.5% and 5.8%, respectively, compared to 1.7% for the Alerian Midstream Energy Select Total Return Index (AMEIX).² 

December Market Commentary

December began with worries about an Omicron driven global slowdown. Midstream as measured by the AMEIX index was down 3% through December 20th until positive headlines emerged that the omicron variant is relatively mild compared to previous COVID-19 variants. The AMEIX Index then staged a rebound into year end, finishing the month up 1.7%.² 

For 2022, we remain positive as we believe 1) free cash flow after dividends is poised to increase over 35% for 2022, 2) volumes may recover as drilling activity improves and 3) capital allocation remains focused on reducing debt and returning excess cash to investors through buybacks and potential dividend increases.³ We continue to believe that a portion of excess cash flow generation above dividends must be used for buybacks to sustain the current equity price recovery into 2022.

Crude oil recovered during the month of December but remained about 10-15% below the $85+ level from late October.⁴  Crude oil as measured by West Texas Intermediate (WTI) was up 12.5% to $75.21 in December.⁴ We continue to believe that crude oil prices in the $60 to $80 range are positive for long-term investment in the American energy industry. Commodity analysts continue to see a tight supply environment for both crude oil and natural gas in 2022 as energy demand appears to be resilient despite the current COVID-19 wave. We believe that current commodity prices are sufficient to lead to U.S. volume growth in 2022, with increases in production already showing up in recent Energy Information Administration (EIA) numbers. The promise of these incremental volumes should be supportive of midstream names going forward. 

As we begin 2022, we believe the below themes will be integral to the energy infrastructure sector. 

1.     Strong Capital Discipline

a.    Capital expenditure (capex) remains well below 2019 and 2020 levels.
b.    Many companies have underutilized assets and only need to spend on sustaining capex.

2.    Free Cash Flow (FCF) Accelerates

a.     Industry FCF grows as capital projects are completed and spending comes down.
b.     We believe free cash flow after dividends is expected to grow in 2022.

3.    Deleveraging Continues⁵

a.    Leverage has declined from 4.7x in 2020 to ~4.3x today.
b.    We see the potential for midstream leverage to decrease below 4.0x by 2023.

4.     Buyback Capacity Improves

a.     2021 was a focus on balance sheets.
b.     2022 will allow companies to direct more capital to buybacks.

5.    Growth and Improving Rate of Change

a.    Earnings before income, tax, depreciation and amortization (EBITDA) Growth⁶
b.    Dividend Growth
c.    Volume Growth
d.    Tariff Growth
e.    Buybacks

6.    Energy Transition is Accelerating

a.    Strength in solar & battery storage.
b.    Renewable fuels continue to ramp and capture capex.
c.    Carbon capture opportunities continue to accelerate.

EMG Utica Pricing Update

Salient Capital Advisors, LLC (the "Adviser") in December 2021 identified an error in the valuation of the EMG Utica portfolio asset, which was corrected on December 31, 2021, resulting in the restatement of the fund's NAV for the period August 19, 2021 until December 30, 2021.  The error resulted in an overstatement of NAV having an impact varying between approximately $0.07 and $0.11 per share during the period.  The Adviser identified that a variable input had instead been hard coded in the model used for fair valuation of this investment, resulting in an error in the fair valuation of the investment.  The improperly hard coded input was corrected and the fair valuation reflected on December 31, 2021.  The correction resulted in the need for restatement of the Fund's NAV for the period noted above, and the error resulted in a reimbursement to the Fund by the Adviser of approximately $5,600 in advisory fees.  The proper valuation will be reflected in the Fund's audited financial statements for the period ended November 30, 2021, when issued.

The Fund's Top 10 holdings as of December 31, 2021 are shown below:⁷

The Fund's unaudited balance sheet as of December 31, 2021 is shown below:

Past performance is not indicative of future results.

Salient Midstream & MLP Fund is a Delaware statutory trust registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. The Fund's investment objective is to provide a high level of total return with an emphasis on making quarterly cash distributions to its common shareholders. The Fund seeks to achieve that objective by investing at least 80% of its total assets in securities of MLPs and midstream companies. There can be no assurance that the Fund will achieve its investment objective.

This press release contains "forward-looking statements" as defined under the U.S. federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will," and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual future results to differ significantly from the Fund's present expectations or projections indicated in any forward-looking statements. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; leverage risk; valuation risk; interest rate risk; tax risk; the volume of sales and purchase of shares; the continuation of investment advisory, administration and other service arrangements; and other risks discussed in the Fund's filings with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Fund undertakes no obligation to publicly update or revise any forward-looking statements made herein. There is no assurance that the Fund's investment objective will be attained.

About Salient
Salient Partners, L.P. ("Salient") is a real asset and alternative investment firm that offers a suite of strategies focused on energy and infrastructure, real estate and tactical alternative investments. Institutions and investment advisors turn to Salient to build smarter, more efficient portfolios. Strategies are offered in the form of open- and closed-end funds and separately managed accounts. Salient was founded in 2002 and has offices in Houston and San Francisco. Learn more about Salient at www.salientpartners.com.

View original content to download multimedia:https://www.prnewswire.com/news-releases/salient-midstream--mlp-fund-announces-unaudited-net-asset-value-as-of-december-31-2021-301455846.html

SOURCE Salient Partners, L.P.