uploads///EPD

What’s EPD’s Correlation with Natural Gas?

By

Dec. 4 2017, Updated 10:32 a.m. ET

EPD versus natural gas

So far in this series, we’ve looked into the top six MLPs in terms of correlation with natural gas including Golar LNG Partners (GMLP), Boardwalk Pipeline Partners (BWP), Dorchester Minerals (DMLP), Legacy Reserves (LGCY), DCP Midstream (DCP), and Black Stone Minerals (BSM). In this article, we’ll look into the commodity price exposure of the MLP in the seventh spot, Enterprise Products Partners (EPD).

Enterprise Products Partners, the largest MLP in terms of market capitalization, had a six-month correlation of 0.23 as of November 27. However, EPD’s three-month correlation with crude oil of 0.18 is lower compared to natural gas, which could be due to the partnership’s low crude oil exposure.

EPD’s correlation with natural gas might reflect its involvement in natural gas processing and natural gas transportation. EPD has low direct natural gas exposure. However, the fluctuation in natural gas prices impacts drilling activity, which might impact EPD’s throughput volumes.

Article continues below advertisement

Analysts’ recommendations

91.7% of analysts surveyed by Reuters rate Enterprise Products Partners a “buy” as of November 27, 2017, and the remaining 8.3% rate it as a “hold.” Seaport Global last initiated coverage on EPD with a “neutral” rating, which is equivalent to “hold.” Overall, EPD has seen three rating updates in 2017 including two new coverages and one upgrade. EPD is currently trading below the low end ($26) of analysts’ consensus target range. EPD’s average target price of $31.8 implies ~31% upside potential from the current price levels.

In the next article, we’ll look at the correlation between Williams Partners (WPZ) and natural gas.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.