3 Midstream Energy Stocks to Gain Despite Prevailing Uncertainty
Uncertainties are prevailing in the broader market, making the overall energy sector turbulent. Companies belonging to the sector have witnessed a choppy business environment since the onset of the coronavirus pandemic.
The initial pandemic period, when there were no vaccines, saw an environment of heightened uncertainties. The commodity’s price plunged to a negative $36.98 per barrel on Apr 20, 2020. However, with the rapid developments of vaccines by scientists, which in turn led to the gradual opening of the economies, the pricing scenario of West Texas Intermediate (WTI) crude improved drastically over time to reach $123.64 per barrel on Mar 8, 2022. Oil price data are per the U.S. Energy Information Administration. WTI crude price is trading below the $70 per barrel mark presently, stemming from concerns over a fresh financial crisis that could hurt future oil demand.
Considering the backdrop, it would be wise for investors to keep an eye on midstream stocks like Enterprise Products Partners LP EPD, Kinder Morgan, Inc. KMI and MPLX LP MPLX.
Midstream Energy Players to the Rescue
Although the fate of energy players is highly dependent on oil and gas prices, stocks belonging to midstream space have lower exposure to volatility in commodity prices. This is because midstream players generate stable fee-based revenues since the transportation and storage assets are being booked by shippers for the long term. Thus, their business model is relatively low-risk, signifying considerably less exposure to both oil and gas price and volume risks.
We have employed our Stock Screener to zero in on three stocks belonging to the midstream energy space. All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3 Stocks in the Spotlight
Enterprise Products Partners: Enterprise Products generates stable fee-based revenues from its extensive pipeline network across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
The midstream infrastructure provider also has storage assets that can hold more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can also store 14 billion cubic feet of natural gas. Moreover, Enterprise Products has $5.8 billion of major capital projects under construction that are likely to provide incremental fee-based revenues.
MPLX LP: MPLX has ownership and operating interests in midstream energy infrastructure and logistics assets, thereby generating stable cashflows. With a strong focus on returning capital to unit holders, MPLX has roughly $846 million remaining available under its authorization for unit repurchases.
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 83,000 miles, Kinder Morgan is a leading energy infrastructure company in North America. It derives most of its earnings from take-or-pay contracts, generating stable fee-based revenues.
Kinder Morgan is poised to grow on the back of its business model, which is relatively resilient to volume and commodity price risks.
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Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report
Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report
MPLX LP (MPLX) : Free Stock Analysis Report
