Midstream stocks fell
Top midstream stocks including Kinder Morgan (KMI), Williams Companies (WMB), and ONEOK (OKE) fell last week. Williams Companies fell 2.5% for the week, whereas ONEOK and Kinder Morgan fell 1.9% and 1.8%, respectively. The Alerian MLP Index fell 1.3% for the week. On the other hand, the Energy Select Sector SPDR ETF (XLE) rose 0.9% last week.
The above graph shows the performance of selected midstream stocks in the last week. Crude oil prices rose 3.5% for the week. Learn more about the latest factors driving oil prices in Bears Beware: Crude Oil Approaches New High.
Magellan Midstream Partners (MMP) fell 1.7% last week, whereas Plains All American Pipeline (PAA) rose 0.7%. Stifel’s rating upgrade, which we’ll discuss later in the series, and stronger oil prices likely resulted in Plains All American’s outperformance last week.
ONEOK’s capital projects
ONEOK stock has risen ~24% so far in 2018. Learn more about the stock in KMI, WMB, and OKE: Which S&P 500 Midstream Stock Looks the Best? On September 25, ONEOK announced plans to construct additional NGL (natural gas liquids) fractionation and pipeline capacity and gas processing capacity. These plans include a new NGL fractionator, the Demicks Lake II natural gas processing plant, and the extension and expansion of the Arbuckle II NGL pipeline. The projects are together expected to cost ~$1.5 billion and expected to generate adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) multiples of 4x to 6x. ONEOK doesn’t expect to issue equity in 2018 or well into 2019.
Let’s next take a look at last week’s top gainers and losers in the MLP and midstream space.