These Top Midstream Companies Offer Maximum Upside Potential



Upside potential

So far, 2018 hasn’t been a good year for midstream energy companies. Most midstream companies are trading in the negative territory despite improved crude oil prices and strong US drilling activity. For a recent analysis of crude oil fundamentals, read Crude Oil Prices Could Fall in the Next Few Quarters.

The Alerian MLP ETF (AMLP), which is made up of 25 energy MLPs (AMLP), has fallen 12.1% YTD (year-to-date). AMLP is underperforming the SPDR S&P 500 ETF (SPY) and the Energy Select Sector SPDR ETF (XLE) YTD. SPY and XLE have fallen 0.6% and 5.3%, respectively, to date in 2018. AMLP is underperforming SPY and XLE by 1,270 basis points and 1,740 basis points, respectively.

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AMLP’s underperformance relative to the broader US markets and the energy sector could be attributed to the rise in Treasury yields, the FERC’s (Federal Energy Regulatory Commission) revised income tax ruling, regulatory hurdles, and recent rating downgrades. Most of these factors seem to have been priced in. Midstream companies could be on a path to recovery following the recent decline in ten-year Treasury yields, the lack of material impact of the FERC’s ruling on most midstream companies, and a general recovery in the US markets as trade war tensions cool off.

Having said that, in this series, we’ll look at the companies that offer the highest upside potentials among the top midstream players. The top midstream companies ranked in order of their upside potentials are as follows:

  • Boardwalk Pipeline Partners (BWP)
  • Shell Midstream Partners (SHLX)
  • Antero Midstream Partners (AM)
  • Energy Transfer Partners (ETP)
  • Kinder Morgan (KMI)
  • Williams Companies (WMB)
  • Energy Transfer Equity (ETE)
  • Buckeye Partners (BPL)
  • EQT Midstream Partners (EQM)
  • Western Gas Equity Partners (WGP)
  • Valero Energy Partners (VLP)

In this series, we’ll look into these companies’ recent market performances, upside potentials, valuations, and analyst recommendations.


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