ClearBridge Energy Midstream Opportunity Stock Price, News & Analysis
Company Description
ClearBridge Energy Midstream Opportunity Fund Inc. (NYSE: EMO) is a non-diversified, closed-end management investment company. According to its disclosures, the Fund’s investment objective is to provide long-term investors with a high level of total return with an emphasis on cash distributions. EMO focuses on investments in midstream entities involved in activities such as gathering, transporting, processing, fractionation, storing, refining and distribution of oil, natural gas liquids and natural gas.
The Fund is advised by Franklin Templeton Fund Adviser, LLC (FTFA) and subadvised by ClearBridge Investments, LLC. FTFA and ClearBridge are described as indirect, wholly-owned subsidiaries of Franklin Resources, Inc.. EMO’s shares trade on the New York Stock Exchange under the ticker symbol EMO, and it is categorized in the financials space as a closed-end fund with a focus on energy midstream investments.
Investment focus and portfolio characteristics
The Fund states that it considers investments in midstream entities to include companies that provide midstream services across the energy value chain, including gathering, transporting, processing, fractionation, storing, refining and distribution of oil, natural gas liquids and natural gas. Periodic balance sheet updates show that EMO holds a portfolio of equity investments in a range of publicly traded midstream companies.
Top equity holdings reported in recent unaudited balance sheet information have included names such as Targa Resources Corp., Energy Transfer LP, MPLX LP, Williams Cos. Inc., Western Midstream Partners LP, ONEOK Inc., Kinder Morgan Inc., Enterprise Products Partners LP, Enbridge Inc., TC Energy Corp., Hess Midstream LP and Antero Midstream Corp. The Fund notes that its top ten equity holdings and portfolio composition are subject to change at any time, and percentages are presented as a share of total equity investments.
Structure as a closed-end fund
As a closed-end management investment company, EMO issues a fixed number of shares that trade on the NYSE. The Fund periodically reports its net asset value (NAV), total assets, leverage and asset coverage ratios under the Investment Company Act of 1940. In its recurring press releases, EMO provides an unaudited statement of assets and liabilities, including investments, cash and cash equivalents, other assets, total assets, various forms of leverage, deferred tax liabilities, other liabilities and net assets, along with the number of outstanding shares.
The Fund reports asset coverage ratios under the 1940 Act with respect to senior indebtedness and total leverage. These ratios are calculated based on the Fund’s senior notes, loans outstanding and mandatory redeemable preferred shares, as disclosed in its unaudited balance sheet summaries. The Fund also notes that this financial data is unaudited and that more detailed information is available in its semi-annual and annual reports and Form N-PORT filings with the Securities and Exchange Commission.
Use of leverage and capital structure
EMO reports the use of senior notes, loans outstanding and mandatory redeemable preferred shares as components of its leverage. The Fund discloses total leverage and related asset coverage ratios in its periodic balance sheet announcements. These disclosures also include deferred tax liabilities, distributions payable and other liabilities, which together with total leverage determine net assets attributable to common shareholders.
The Fund has also described capital-raising activity through a transferable rights offering. In connection with such an offering, EMO disclosed that its Board of Directors approved an offer allowing existing stockholders to receive one transferable right for each share of common stock held on a specified record date. Three rights plus the final subscription price per share were required to purchase one additional share of common stock in the primary subscription, with an over-subscription privilege for certain stockholders as described in the Fund’s prospectus supplement and base prospectus.
Rights offering and share issuance
In its communications, EMO outlined the mechanics of the rights offering, including the record date, the ratio of rights to new shares, and the method for determining the subscription price. The Fund stated that the subscription price would be based on a formula tied to a percentage of the average of the last reported sales price per share of the Fund’s common stock on the NYSE over a specified period, with a floor based on a percentage of NAV per share at the close of trading on the expiration date.
The Fund announced preliminary and final results of the rights offering, including the anticipated and final number of shares of common stock to be issued and the gross proceeds expected from the offer. EMO also noted that rights ceased trading on the NYSE after the expiration date and that any excess payments from subscribing investors would be returned in full.
Reporting and regulatory disclosures
ClearBridge Energy Midstream Opportunity Fund Inc. states that it files semi-annual and annual reports with the Securities and Exchange Commission (SEC), as well as a complete schedule of portfolio holdings for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. These filings provide more detailed information on the Fund’s portfolio, investment strategies, risks, charges and expenses.
The Fund’s press releases emphasize that the financial data provided is unaudited and for informational purposes only. They also highlight that shares of closed-end investment companies such as EMO frequently trade at a discount from their net asset value and that the market price of the Fund’s shares is influenced by factors beyond the Fund’s control. The Fund notes that there is no guarantee that investment decisions made by ClearBridge Investments, LLC, as subadviser, will produce desired results and that all investments involve risks, including possible loss of principal.
Affiliation with Franklin Resources
EMO’s adviser and subadviser are described as indirect, wholly-owned subsidiaries of Franklin Resources, Inc., which operates through its subsidiaries as Franklin Templeton. Franklin Resources is characterized in the Fund’s communications as a global investment management organization with specialist investment managers offering capabilities in areas such as fixed income, equity, alternatives and multi-asset solutions. EMO’s materials reference Franklin Templeton’s broader investment management expertise as context for the advisory relationships, while also noting that Franklin Resources and its affiliates do not engage in selling shares of the Fund in the press releases cited.
Investor information and access to documents
The Fund indicates that shareholders can obtain copies of its semi-annual and annual reports, as well as information on Form N-PORT filings, through the SEC’s website or by contacting the Fund via the telephone number provided in its press releases. EMO also notes that hard copies of the Fund’s complete audited financial statements are available free of charge upon request. Additional information about the Fund, its investment strategies and portfolio management discussions is available in its most recent Annual or Semi-Annual Report to Stockholders.
Risk considerations and trading characteristics
In its announcements, EMO reiterates that shares of closed-end investment companies often trade at a discount to NAV and that the Fund cannot predict whether its shares will trade at, below or above NAV. The Fund’s disclosures emphasize that investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing, and that the base prospectus and any prospectus supplement contain additional information that should be read carefully.