Where Does Rice Midstream Stand Compared to Its Peers?



Enterprise value

Rice Midstream Partners (RMP) has an EV (enterprise value) of $1.7 billion. EV, which is approximately equal to market equity value plus the net debt (debt minus cash), is an important metric in the valuation of an entire business. Equity value alone just gives the value to equity holders.

Western Gas Partners (WES) has the largest enterprise value of $10.3 billion, among the selected peers.

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RMP’s EV-to-EBITDA multiple

Of the selected companies, RMP’s forward EV-to-EBITDA (EV-to-earnings before interest, taxes, depreciation, and amortization) multiple of 14.0x is above the group average of 13.0x. This might reflect RMP’s strong distribution growth guidance, low leverage, impressive distribution coverage, and dropdown opportunities.

Notably, Cone Midstream Partners (CNNX) has the highest forward EV-to-EBITDA of 15.3x.

Profitability margins and distribution yield

RMP has the highest profitability margins among its selected peer group. RMP’s high operating margin of 60.9% reflects its 100% fee-based revenues, and the partnership has the second-highest gross margin (75.4%) in the peer group, after Summit Midstream Partners (SMLP).

Rice Midstream Partners’ distribution yield of 4.9% is below the group average of 6.5%. Antero Midstream Partners (AM), which has a higher distribution guidance than RMP, has a distribution yield of 4.0%. Remember, low distribution yield likely indicates low risk and low cost of equity capital.

RMP recently announced a public offering of 8 million common units, which were priced at $18.5 per unit.

In the next part, we’ll analyze Rice Midstream’s exposure to commodity prices.


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