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Why EnLink Midstream Is Reaching New YTD Lows

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EnLink Midstream’s market performance

EnLink Midstream Partners (ENLK), the midstream MLP formed by Devon Energy (DVN) to provide natural gas midstream services, is experiencing new YTD (year-to-date) lows with the decline in commodity prices. 

ENLK stock fell to $15.50 on June 20, 2017, following a 2.0% decline due to weakness in crude oil and natural gas prices. The current price level is close to its 52-week low of $14.90. The partnership has fallen 8.7% since the beginning of June and has fallen 12.2% YTD.

EnLink Midstream rallied 2.6% after it announced an agreement with ONEOK Inc. to move NGLs (natural gas liquids) from Central Oklahoma to its Cajun-Sibon storage platforms and Mont Belvieu trading hub. However, these gains were offset by the plunge due to weak commodity prices.

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EnLink Midstream’s commodity exposure

ENLK is exposed to crude oil prices through its Natural Gas Midstream business and indirectly to natural gas prices through its Natural Gas Gathering business. However, ENLK is expected to benefit from its strong position in the Permian and STACK regions, which have experienced strong drilling activity despite the slump in prices.

EnLink Midstream’s valuation

EnLink Midstream Partners was trading at a forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 11.2x on June 20, 2017. This is slightly above the last-five-year average of 11.1x. However, it is below the peer median multiple of 11.5x. 

ENLK’s low valuation relative to its peers could reflect its high commodity price exposure, flat distribution, and low distribution coverage.

EnLink Midstream’s analyst recommendation

Of the analysts that cover EnLink Midstream Partners, 52.6% rated it as a “hold” on June 20, 2017. Plus, 42.1% rated it as a “buy,” and the remaining 5.3% rated it as a “sell.” ENLK’s average target price of $19.60 implies a 29.0% return from its current price of $15.20.

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