Company: SRV
Filing Date: 2025-08-08
Form Type: N-CSRS
Source: 0001398344-25-014835
Chunk: 3

Company: NXG Cushing Midstream Energy Fund
Filing Date: 2025-08-08
Form: N-CSRS
Chunk 3
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. shale producers. A subsequent announcement by OPEC+ in May adding a further 411,000 barrels per day from June helped keep downward pressure on crude oil prices through the end of the period.

Despite their defensive fundamentals, midstream equities faced outsized selling pressure. The drawdown appeared more technical than fundamental, driven by deteriorating macro sentiment and falling crude prices. Midstream business models remain largely insulated from commodity volatility, supported by volume-based contracts and disciplined balance sheets. Direct tariff exposure is limited, primarily tied to steel input costs. Indirectly, sentiment was weighed down by concerns over global growth and softer pricing.

In our view, the selloff was overdone. Valuations have reset meaningfully, creating a compelling entry point for long-term investors. Today’s midstream sector is structurally stronger than in past cycles, with lower leverage, growing free cash flow, and a disciplined approach to capital allocation.

Fund Performance and Strategy

For the period, the Fund posted a -11.48% NAV total return, underperforming its benchmark, the Alerian Midstream Energy Index (AMEI), which returned -2.80%. Most subsectors detracted, with the largest negative contributions coming from Natural Gas Gatherers & Processors, Large-Cap Diversified C-Corps, and Large-Cap Diversified MLPs. Contributions reflect both relative weighting and total return.

On an absolute basis, the top detractors were ONEOK, Inc. (NYSE: OKE), Targa Resources Corp. (NYSE: TRGP), and Energy Transfer, LP (NYSE: ET). All three holdings were pressured by declining commodity prices, which led to lower expectations for production growth in the basins they serve.

From a relative standpoint, underperformance was primarily driven by stock selection in non-benchmark holdings within the Renewable YieldCo, LNG, and upstream subsectors. While these positions were consistent with our broader thematic views, several underdelivered due to company-specific or timing-related issues. The Fund’s largest relative detractors were Venture Global, Inc. (NYSE: VG), XPLR Infrastructure, LP (NYSE: XIFR), and Viper Energy, Inc. (NASDAQ: VNOM).

Venture Global was the single largest detractor from the Fund’s relative performance. We initially avoided its IPO in January 2025 due to valuation concerns but entered the position after a post-IPO selloff. That decision proved premature. In March, the company missed earnings expectations and lowered full-year