NXG Cushing Midstream Energy ord Stock Price, News & Analysis

NXG Cushing Midstream Energy Fund (NYSE: SRV) is a non-diversified, closed-end management investment company that trades on the New York Stock Exchange under the symbol SRV. The fund’s stated investment objective is to obtain a high after-tax total return from a combination of capital appreciation and current income. It pursues this objective by focusing on midstream energy investments and is advised by Cushing Asset Management, LP, doing business as NXG Investment Management, an SEC-registered investment adviser headquartered in Dallas, Texas.

The fund invests, under normal market conditions, at least 80% of its net assets, plus any borrowings for investment purposes (or at least 80% of managed assets, as described in some disclosures), in a portfolio of midstream energy investments. According to the fund’s descriptions, midstream energy investments are defined as investments that offer economic exposure to securities of midstream energy companies. These are companies that provide midstream energy services in the energy infrastructure sector.

The fund considers a company to be a midstream energy company if at least 50% of its assets, income, sales or profits are committed to, derived from, or otherwise related to midstream energy services. The services cited by the fund include gathering, transporting, processing, fractionation, storing, refining and distribution of natural resources. The natural resources referenced in the fund’s materials include natural gas, natural gas liquids, crude oil, refined petroleum products, biofuels, carbon sequestration, solar and wind.

As a closed-end fund, SRV’s shares trade on their market value on the NYSE rather than directly on the fund’s net asset value (NAV). The fund’s disclosures emphasize that the NAV will fluctuate with the value of the underlying securities in which it invests, and that closed-end funds often trade at a discount to their NAV. Investments in the fund involve operating expenses and fees, and there can be no assurance that the fund will achieve its investment objective.

The fund also discloses that it utilizes leverage as part of its investment strategy in certain communications. Leverage can magnify the impact of changes in the value of the underlying portfolio on the fund’s NAV and market price. Future distributions are made if and when declared by the fund’s Board of Trustees, based on factors such as net investment income, financial performance, available cash and compliance with terms and financial covenants of any leverage financing facility, as described in the fund’s distribution announcements.

SRV’s public communications frequently discuss distributions to common shareholders, including regular monthly distributions and, at times, special distributions. These disclosures explain that distributions may include components such as net investment income, return of capital and capital gains. In several notices, the fund has provided preliminary estimates that some distributions, or portions of them, would be treated as return of capital or long-term capital gain for U.S. federal income tax purposes, while also emphasizing that final tax characterizations are determined after the end of the relevant calendar year when the fund calculates its earnings and profits.

The fund’s materials also highlight that the Board of Trustees may defer payment of a declared distribution if it determines that such a deferral is required to comply with applicable law or to ensure that the fund remains solvent, able to pay its debts as they become due, and able to continue as a going concern. In addition, the fund notes that there can be no assurance that the amount or timing of future distributions will be equal or similar to past distributions, and that the Board may decide to suspend or discontinue distributions in the future.

SRV has also engaged in rights offerings, as described in its press releases and regulatory filings. In these offerings, transferable rights were issued to holders of the fund’s common shares of beneficial interest, allowing them to subscribe for additional common shares, often at a subscription price determined as a percentage of the fund’s NAV based on formulas described in the offering materials. The fund has reported that certain rights offerings were oversubscribed and that it intended to invest the net proceeds in accordance with its existing investment objective and policies.

In a Form 8-K, the fund reported entering into a dealer manager agreement in connection with a rights offering, as well as related agreements with a subscription agent and an information agent. The rights offering was conducted pursuant to a prospectus supplement and accompanying prospectus that formed part of an effective shelf registration statement on Form N-2 filed with the Securities and Exchange Commission. The fund indicated that record date shareholders would receive one right for each common share held on the record date and that, subject to specified terms, rights could be exercised to purchase new common shares, with an over-subscription privilege for shareholders who fully exercised their primary subscription rights.

NXG Investment Management (Cushing Asset Management, LP doing business as NXG Investment Management) serves as the fund’s investment adviser. According to the fund’s news releases, this adviser is an SEC-registered investment adviser that serves affiliated funds and managed accounts. The adviser describes itself as providing “Next Generation” investment strategies to investors seeking long-term growth in companies focused on traditional and transformational infrastructure, and in some disclosures references a focus on companies involved in a clean and sustainable future as well as traditional and transformational infrastructure companies.

SRV’s sector and industry classification in external data sources is within finance and insurance, with a more specific categorization related to securities and commodity exchanges. However, the fund’s own descriptions focus on its role as a closed-end management investment company whose portfolio is concentrated in midstream energy investments tied to energy infrastructure services and related natural resources.

Overall, NXG Cushing Midstream Energy Fund (SRV) presents itself, through its regulatory and public communications, as a closed-end fund listed on the NYSE that seeks a high after-tax total return by investing primarily in midstream energy investments, with defined criteria for what constitutes a midstream energy company and midstream energy services, and with an adviser that emphasizes infrastructure-related investment strategies.