Company: SRV
Filing Date: 2025-08-08
Form Type: N-CSRS
Source: 0001398344-25-014835
Chunk: 5

Company: NXG Cushing Midstream Energy Fund
Filing Date: 2025-08-08
Form: N-CSRS
Chunk 5
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 that the impact to the Fund’s NAV and total return will be negatively impacted by leverage, but this strategy is designed to have a positive impact over the longer term.

Average leverage for the period was 32% of managed assets, which compares to an average 34% leverage ratio in the prior fiscal year.

Closing

Midstream companies entered 2025 meaningfully stronger than in prior cycles, with fortified balance sheets, reduced leverage, and record free cash flow. With less of that cash flow now required for debt reduction, companies have increasingly prioritized growth and returns through prudent capital deployment and selective mergers and acquisitions. Equity issuance has largely disappeared, and capital allocation has become more shareholder focused through rising dividends, opportunistic buybacks, and disciplined reinvestment. This enhanced financial flexibility, combined with a growing pipeline of high return brownfield projects, has positioned the sector to deliver stable returns, even in periods of macroeconomic volatility.

Midstream assets are now widely viewed as durable, cash generative investments supported by secular trends including LNG export growth, electrification, reshoring, and rising power demand from artificial intelligence. Near term disruptions, such as tariff headlines, OPEC+ actions, or evolving AI efficiency forecasts, have not altered the sector’s long-term investment case.

Following recent weak performance, valuations have reset to attractive post pandemic levels, creating compelling opportunities across the midstream landscape, particularly among natural gas focused operators and those leveraged to data center driven infrastructure demand.

Looking ahead, we expect EBITDA growth, consistent shareholder returns, and potential multiple expansion to drive attractive long-term outcomes. While a broad valuation rerating is not central to our thesis, we believe current conditions remain favorable and that the sector’s fundamentals, supported by Permian production growth, rising natural gas liquids volumes, and accelerating AI related demand, remain underappreciated by the market.

We remain highly confident in the long-term opportunity ahead and the midstream sector’s ability to deliver sustained outperformance and meaningful value creation.

We truly appreciate your support and look forward to continuing to help you achieve your investment goals.

Sincerely,

John Musgrave
Chief Executive Officer, President, Chief Investment Officer and Portfolio Manager

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The information provided herein represents the opinion of the Fund’s portfolio managers and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice. The opinions expressed are as of the date of this report and are subject to change.

The information in this report is not a complete analysis of every