March 31, 2026
Dear client,
The midstream energy sector delivered strong performance during the first quarter, driven primarily by escalating geopolitical tensions between the United States and Iran and the resulting disruption to global energy supply. Crude oil prices rose sharply in response, with West Texas Intermediate (WTI) increasing from the high-$50s at the start of the year to above $100 per barrel by quarter-end amid constrained flows through the Strait of Hormuz. Against this backdrop, North America’s role as a reliable and strategically critical energy supplier was further reinforced. Within the sector, energy exporters were the primary beneficiaries, reflecting their direct exposure to global pricing dynamics and rising export demand, while broader fundamentals remained supported by stable operations and disciplined capital allocation.
Midstream sector market update
The midstream energy sector, as measured by the Alerian Midstream Energy Index, improved 22.9% during the first quarter, with the Alerian MLP Index (AMZ) increasing 16.9%.
Performance across the sector was driven primarily by escalating geopolitical tensions between the United States and Iran, and the resulting implications for global energy supply. Crude oil prices reflected this uncertainty. WTI crude oil began the year near $57 per barrel, rose to $71 by early March, and ultimately surged above $100 by quarter-end as disruptions to maritime flows through the Strait of Hormuz became increasingly evident. Against this backdrop, the United States was further reinforced as a reliable and strategically critical energy supplier to global markets. Within energy infrastructure, liquefied natural gas (LNG) exporters were the primary beneficiaries, reflecting their direct leverage to global pricing and export demand.
First quarter results across the energy infrastructure sector were largely in line with expectations, with no material surprises to alter the broader industry narrative. Management teams generally introduced 2026 guidance that was both in line with expectations and appropriately conservative. Results reinforced the resilience of the midstream business model, as modest volume growth helped offset commodity price volatility, leaving forward expectations largely intact. Project activity remained healthy, particularly in natural gas pipelines, though the threshold for new project announcements appears to be rising, reflecting the increasing importance of stakeholder alignment and regulatory approval. Strengthening demand continues to support expectations for sustained capital investment into 2026 and 2027. With most projects structured around multi-year construction timelines, companies remain well positioned to fund growth without near-term balance sheet strain, while maintaining flexibility to return capital to shareholders. Capital returns remained a key theme during the quarter. The sector executed more than $1.2 billion of share repurchases, bringing 2025 buybacks to nearly $5 billion, underscoring management confidence in the durability and visibility of underlying cash flows.
To highlight the value of pipeline infrastructure, look no further than the Permian Basin. Natural gas economics in west Texas are poised for a meaningful inflection as new pipeline capacity begins to alleviate persistent takeaway constraints out of the Permian Basin. Since 2024, prices at the Waha hub have frequently traded at negative levels, averaging approximately negative $1.39 per million Britisth thermal units (MMBtu) in the first quarter versus $3.47 at Henry Hub, reflecting insufficient infrastructure to move associated gas production to demand centers. Because Permian producers are primarily driven by crude oil economics, these negative prices have not curtailed supply but instead have forced producers and shippers to effectively pay to dispose of gas, pressuring well-level returns, particularly in gassier regions such as the western Delaware Basin. This dynamic is set to improve materially with the expected addition of approximately 4.6 billion cubic feet per day (Bcf/d) of new takeaway capacity in the second half of 2026, including the Gulf Coast Express expansion, the 2.5 Bcf/d Blackcomb Pipeline, and the Hugh Brinson pipeline. As these projects come online, Waha pricing is expected to normalize, significantly enhancing production economics and driving increased volumes through midstream gathering and processing systems, improving asset utilization across the region. Looking further ahead, additional large-scale projects such as Eiger Express and Desert Southwest are expected to extend this more constructive pricing environment into the latter part of the decade, reinforcing a favorable outlook for Permian energy infrastructure.
Strategy Performance
The Tortoise Select MLP Composite saw gross and net returns of 19.5% and 19.3% for the quarter, respectively. By comparison, the Tortoise MLP Total Return Index returned 17.6% and the Alerian MLP Index returned 16.9%. Your individual portfolio performance, taking fees into account, is available upon request.
Factors that drove the strategy’s performance during the quarter:
- Crude oil pipeline companies — top performing segment
- Natural gas pipeline companies — second highest performing segment
- Gathering & processing companies — weakest performing segment
Concluding thoughts
Energy infrastructure companies continue to deploy capital with a disciplined emphasis on enhancing shareholder returns. An increasing share of investment is being directed toward projects that support the accelerating power demands of data centers and broader electrification trends. As global energy demand rises, North America has further solidified its role as a dependable and stable supplier to global markets, an advantage that has become even more pronounced amid recent supply disruptions stemming from geopolitical tensions, including the war in Iran. In this environment, the strategic value of North American energy infrastructure has been reinforced, providing critical reliability, flexibility, and security of supply to both domestic and international end markets. Long-lived infrastructure assets remain essential in connecting these abundant resources to end users worldwide. We believe these durable structural tailwinds continue to underpin the sector’s ability to deliver resilient, long-term growth and attractive risk-adjusted returns.
Sincerely,
Tortoise Capital
Important Information
This strategy is advised by Tortoise Capital Advisors, L.L.C. (“Tortoise Capital”). The Tortoise Select MLP Composite is a composite of Tortoise Capital managed accounts focused on investments in publicly traded MLPs predominately comprised of U.S. energy infrastructure assets. The Alerian Midstream Energy Total Return Index is a broad-based composite of North American energy infrastructure companies. The capped, float- adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities, is disseminated real-time on a price-return basis (AMNA) and on a total-return basis (AMNAX). The Alerian MLP Index is the leading gauge of energy infrastructure master limited partnerships (MLPs). The capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities, is disseminated real-time on a price- return basis (AMZ) and on a total-return basis (AMZX). The Tortoise MLP Total Return Index® is a float-adjusted, capitalization-weighted index of energy master limited partnerships (MLPs). The index is comprised of publicly traded companies organized in the form of limited partnerships or limited liability companies engaged in transportation, production, processing and/or storage of energy commodities. To be eligible for inclusion in the Tortoise MLP Index®, a company must be publicly traded, organized as a limited partnership or a limited liability company, and be classified as an “energy MLP” by the Master Limited Partnership Association (MLPA). Returns include reinvested dividends and income. You cannot invest directly in an index. Gross results are before management fees but are inclusive of costs. Client returns will be reduced by advisory fees and other expenses incurred as a client. Net returns presented are based on a model fee rate using the strategy’s standard annual fee of 75 basis points of the market value of assets adjusted quarterly. The compounding effect of advisory fees would reduce annualized returns by approximately 82 basis points at 10% total annual return. From Inception through 8/31/2017, a model fee of 1% was used. Model fees represent the highest fee in the fee schedule for each respective period. Such impact would vary with rates of portfolio returns. Fees may be lower for older accounts with grandfathered fees or for accounts with negotiated fees based on size of account and the nature and level of services provided by Tortoise Capital. See Part 2A of Tortoise Capital’s Form ADV for additional fee disclosures. A complete list of Tortoise Capital Performance Composites is available upon request.
The securities referenced herein are presented for informational purposes only and are not intended as an offer, solicitation, or recommendation to purchase or sell any security.
Past performance is no guarantee of future results.
FOR CURRENT CLIENT USE ONLY