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The 10 MLPs Most Correlated with Crude Oil

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Part 7
The 10 MLPs Most Correlated with Crude Oil PART 7 OF 11

Why Crestwood Equity Partners’ Crude Oil Exposure Could Increase

Crestwood Equity Partners

Crestwood Equity Partners (CEQP), a midstream MLP involved in natural gas transportation, natural gas gathering and processing, crude oil gathering, and crude oil and NGL (natural gas liquid) logistics, has the sixth-highest correlation with crude oil among MLPs. CEQP’s one-year correlation with crude oil was 0.44 on October 6, 2017.

Why Crestwood Equity Partners’ Crude Oil Exposure Could Increase

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CEQP’s high correlation with crude oil could be due to its natural gas processing and crude oil logistics business. Crestwood Equity Partners expects to spend $380 million–$400 million on capital projects by the end of this year, of which $285 million–$295 million (or 74.3%) is expected to be spent on the expansion of its gathering and processing infrastructure. EnLink Midstream Partners (ENLK), Energy Transfer Partners (ETP), and DCP Midstream (DCP) are bullish on the expansion of their processing capacity.

Analysts’ recommendations

On October 6, 2017, 60% of analysts surveyed by Reuters rated Crestwood Equity Partners a “hold,” 20% rated it a “buy,” and the remaining 20% rated it a “sell.” Stifel Nicolaus upgraded CEQP to “buy” in August. Overall, CEQP has seen two rating updates in 2017, and both were upgrades. CEQP’s average target price of $26.40 implies an ~8% upside potential based on its current price. In the next article, we’ll discuss the correlation between Golar LNG Partners (GMLP) and crude oil.

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