Company: SRV
Filing Date: 2025-02-10
Form Type: N-CSR
Source: 0001398344-25-002262
Chunk: 73

Company: NXG Cushing Midstream Energy Fund
Filing Date: 2025-02-10
Form: N-CSR
Chunk 73
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 flows may be adversely affected, which could in turn adversely affect the results of the Fund.

Weather Risk.Extreme weather conditions could result in substantial damage to the facilities of certain midstream energy companies located in the affected areas and significant volatility in the supply of natural resources, commodity prices and the earnings of midstream energy companies and could therefore adversely affect their securities.

Interest Rate Risk.The prices of the equity and debt securities of the midstream energy companies the Fund expects to hold in its portfolio are susceptible in the short-term to a decline when interest rates rise. Rising interest rates could limit the capital appreciation of securities of certain midstream energy companies as a result of the increased availability of alternative investments with comparable yields. Rising interest rates could adversely impact the financial performance of midstream energy companies by increasing their cost of capital. This may reduce their ability to execute acquisitions or expansion projects in a cost-effective manner.

Business Segment Specific Risk.Midstream energy companies are also subject to risks that are specific to the particular business segment of the natural resources sector in which they operate.

Pipelines. Pipeline companies are subject to the demand for natural gas, natural gas liquids, crude oil or refined products in the markets they serve, changes in the availability of products for gathering, transportation, processing or sale due to natural declines in reserves and production in the supply areas serviced by the companies’ facilities, sharp decreases in crude oil or natural gas prices that cause producers to curtail production or reduce capital spending for exploration activities, and environmental regulation. Demand for gasoline, which accounts for a substantial portion of refined product transportation, depends on price, prevailing economic conditions in the markets served, and demographic and seasonal factors. Companies that own interstate pipelines that transport natural gas, natural gas liquids, crude oil or refined petroleum products are subject to regulation by FERC with respect to the tariff rates they may charge for transportation services. An adverse determination by FERC with respect to the tariff rates of such a company could have a material adverse effect on its business, financial condition, results of operations and cash flows of those companies and their ability to pay cash distributions or dividends. In addition, FERC has a tax allowance policy, which permits such companies to include in their cost of service an income tax allowance to the extent that their owners have an actual or potential tax liability on the income generated by them. If FERC’s income tax allowance policy were to change in the future to disallow a material portion of the income tax allowance taken by such interstate pipeline companies, it would adversely impact the maximum tariff rates that such companies are permitted