Which Segment Drove Rice Midstream Partners’ High 3Q17 Earnings Margin?
TTM EBITDA margin
Rice Midstream Partners (RMP), which is now owned by EQT Corporation (EQT), ranks 7th in terms of its EBITDA (earnings before interest, tax, depreciation, and amortization) margin among the top MLPs (master limited partnerships) today.
RMP became a wholly owned subsidiary of EQT after the Rice Energy-EQT merger. RMP is involved in natural gas gathering, natural gas compression, and water-related midstream services. It posted a TTM (trailing-12-month) EBITDA margin of 76.5% in 3Q17. Similar to EQT Midstream Partners (EQM), RMP’s high EBITDA margins have been driven by its involvement in the high-margin natural gas gathering and compression business.
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Rice Midstream Partners’ Gathering and Compression and Water Services segments have high EBITDA margins. But the Gathering and Compression segment has a slightly higher EBITDA margin than the Water Services segment has, and this has driven partnership’s overall EBITDA margin. The two segments posted quarterly EBITDA margins of 78.3% and 73.8%, respectively, for 3Q17.
Notably, 54.5% of the analysts surveyed by Reuters recommend a “hold” for RPM, while 45.5% recommend a “hold” as of December 5, 2017. RMP saw several rating downgrades and price target cuts in June 2017 after the EQT-RICE merger announcement.
These ratings downgrades were due to EQT’s plans to dropdown remaining midstream asset in Rice Energy to EQT Midstream. RMP’s average target price of $22.5 implies an ~8% upside potential from its current price level.
Now we’ll look into Höegh LNG Partners’ (HMLP) EBITDA margin.