June 30, 2026
Dear client,
The midstream energy sector delivered relatively flat performance during the quarter as investors balanced constructive long-term fundamentals against easing geopolitical tensions. Following a sharp rally early in the quarter amid conflict between the United States and Iran, energy prices retraced much of their gains after a ceasefire reduced concerns over potential supply disruptions. While commodity price volatility weighed on sentiment, the sector’s underlying fundamentals remained resilient, supported by stable volumes, fee-based cash flows, and disciplined capital allocation. Investors also continued to recognize the favorable long-term outlook for North American energy infrastructure, driven by growing demand for liquefied natural gas (LNG) exports, increasing natural gas consumption to support power generation, and the strategic importance of reliable U.S. energy supplies.
Midstream sector market update
The midstream energy sector posted a slight gain of 0.2% during the second quarter, as measured by the Alerian Midstream Energy Index, with the Alerian MLP Index (AMZ) increasing 1.4%.
Market performance was shaped largely by easing geopolitical tensions between the United States and Iran and the resulting reduction in concerns over global energy supply disruptions. Crude oil prices traced that evolving backdrop. West Texas Intermediate (WTI) crude oil began the quarter at $101 per barrel, climbed to $113 in early April as the conflict with Iran intensified, and ultimately retreated to $70 by quarter-end as maritime traffic through the Strait of Hormuz normalized and supply concerns eased. Despite the decline in oil prices, the quarter reinforced the United States’ role as a reliable and strategically important energy supplier to global markets. Within energy infrastructure, LNG exporters were the primary beneficiaries, reflecting some exposure to global pricing and growing export demand.
Second-quarter results across the energy infrastructure sector were broadly better than expected, with many companies either raising full-year guidance or indicating performance was tracking ahead of expectations established prior to the conflict with Iran. Stronger than expected results reflected a combination of colder winter weather, wide Permian natural gas basis differentials, and favorable market conditions created by disruptions to global energy supply and heightened commodity price volatility. Management teams also expressed growing confidence in 2027 volume growth, while capital expenditure guidance increased as companies announced new investment opportunities. Much of the incremental spending is directed toward behind-the-meter power projects, new natural gas processing plants, and pipeline expansions designed to serve rising natural gas demand and growing data center electricity load, particularly in the Upper Midwest. Importantly, most of these projects are supported by long-term contracts and multi-year construction schedules, allowing companies to fund growth while maintaining strong balance sheets and continuing to return capital to shareholders. Share repurchases moderated to less than $1.0 billion during the quarter, down from $1.2 billion in the fourth quarter, with Cheniere Energy accounting for more than $500 million in total buybacks.
The investment case for energy infrastructure continues to strengthen as energy security and reliability become enduring priorities. Governments and businesses are increasingly favoring resilient supply chains, domestic production, and long-lived infrastructure over pure cost optimization, driving capital toward assets that provide dependable energy and power delivery. At the same time, AI, electrification, and expanding data center demand are creating a new source of structural growth. Together, these forces are increasing the value of pipelines, LNG infrastructure, electric transmission, and power generation, reinforcing the essential role energy infrastructure plays in supporting long-term economic growth and national security.
Strategy performance
The Tortoise Strategic Energy Infrastructure Composite saw gross and net returns of 0.6% and 0.5% for the quarter, respectively. By comparison, the Alerian Midstream Energy Total Return Index returned 0.2%. Your individual portfolio performance, taking fees into account, is available upon request.
Factors that drove the strategy’s performance during the quarter:
- Gathering and processing companies — top performing segment
- Crude oil companies — second highest performing segment
- Natural gas pipeline companies — weakest performing segment
Concluding thoughts
Energy infrastructure companies continue to allocate capital with a disciplined focus on enhancing shareholder returns while increasingly investing in projects that support rising power demand from data centers and broader electrification. At the same time, North America’s position as a reliable, low-cost energy supplier has become increasingly important as global energy demand grows and geopolitical disruptions underscore the value of secure supply chains. Long-lived energy infrastructure assets remain essential in connecting abundant North American resources to domestic and international markets. We believe these durable structural tailwinds support resilient long-term growth and attractive risk-adjusted returns across the sector.
Sincerely,
Tortoise Capital
Important Information
This strategy is advised by Tortoise Capital Advisors, L.L.C. (“Tortoise Capital”). The Tortoise Strategic Energy Infrastructure Composite is a composite of Tortoise managed accounts focused on midstream energy infrastructure assets and invests across the listed midstream energy space in both c- corporations and MLPs. 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 S&P 500® Index is an unmanaged, market-value weighted index of stocks that is widely regarded as the standard for measuring large-cap U.S. stock market performance. You cannot invest directly in an index. Gross results are before management fees but are inclusive of transactions 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. Such impact would vary with rates of portfolio returns. Model fees represent the highest fee in the fee schedule for the respective period. 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.
Indices are shown for informational and comparative purposes only. An index’s composition may differ materially from how a portfolio is constructed – including holdings, guidelines, restrictions, sectors, correlations, concentrations, volatility, and tracking error, all of which may change over time – and no representation is made that any portfolio will track or reflect any index shown.
Past performance is no guarantee of future results.
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