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Energy Market Is Volatile: 3 Midstream Stocks to Keep an Eye On
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Among the macro factors impacting the broader energy sector, the banking crisis has been rekindling fear of recession and spurring market volatility.
Companies belonging to the sector have been witnessing 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, which led to the gradual opening of the economies, the pricing scenario of West Texas Intermediate 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. Currently, WTI oil price is trading at more than $70 per barrel.
Considering the backdrop, it would be wise for investors to bet on midstream stocks like DCP Midstream LP , The Williams Companies Inc (WMB - Free Report) and MPLX LP (MPLX - Free Report) .
Midstream Energy Players to the Rescue
Although the fate of energy players is highly dependent on oil and gas prices, stocks in 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 that indicates considerably less exposure to oil and gas prices and volume risks.
We have employed our Stock Screener to zero in on three stocks belonging to the midstream energy space that are well poised to gain and hence investors should keep an eye on these stocks. All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
3 Stocks in the Spotlight
DCP Midstream LP: DCP Midstream is a leading provider of midstream services, having a fully integrated and resilient business model. With 12 billion cubic feet of natural gas storage assets, the master limited partnership has 2.8 billion cubic feet of daily natural gas pipeline capacity. DCP Midstream strongly focuses on strengthening its balance sheet with the foremost priority of reducing debt load.
MPLX LP: MPLX has ownership and operating interests in midstream energy infrastructure and logistics assets, thereby generating stable cashflow. With a strong focus on returning capital to unit holders, MPLX repurchased $491 million of common units last year. Under its unit repurchase authorization, the partnership has yet to repurchase the remaining $846 million of its units.
The Williams Companies Inc: The Williams Companies is well-poised to capitalize on the mounting demand for clean energy since it is engaged in transporting, storing, gathering and processing natural gas and natural gas liquids.
With its pipeline networks spread across more than 30,000 miles, The Williams Companies connects premium basins in the United States to the key market. WMB’s assets can meet 30% of the nation’s consumption of natural gas, which is utilized for heating purposes and clean-energy generation.
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Energy Market Is Volatile: 3 Midstream Stocks to Keep an Eye On
Among the macro factors impacting the broader energy sector, the banking crisis has been rekindling fear of recession and spurring market volatility.
Companies belonging to the sector have been witnessing 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, which led to the gradual opening of the economies, the pricing scenario of West Texas Intermediate 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. Currently, WTI oil price is trading at more than $70 per barrel.
Considering the backdrop, it would be wise for investors to bet on midstream stocks like DCP Midstream LP , The Williams Companies Inc (WMB - Free Report) and MPLX LP (MPLX - Free Report) .
Midstream Energy Players to the Rescue
Although the fate of energy players is highly dependent on oil and gas prices, stocks in 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 that indicates considerably less exposure to oil and gas prices and volume risks.
We have employed our Stock Screener to zero in on three stocks belonging to the midstream energy space that are well poised to gain and hence investors should keep an eye on these stocks. All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
3 Stocks in the Spotlight
DCP Midstream LP: DCP Midstream is a leading provider of midstream services, having a fully integrated and resilient business model. With 12 billion cubic feet of natural gas storage assets, the master limited partnership has 2.8 billion cubic feet of daily natural gas pipeline capacity. DCP Midstream strongly focuses on strengthening its balance sheet with the foremost priority of reducing debt load.
MPLX LP: MPLX has ownership and operating interests in midstream energy infrastructure and logistics assets, thereby generating stable cashflow. With a strong focus on returning capital to unit holders, MPLX repurchased $491 million of common units last year. Under its unit repurchase authorization, the partnership has yet to repurchase the remaining $846 million of its units.
The Williams Companies Inc: The Williams Companies is well-poised to capitalize on the mounting demand for clean energy since it is engaged in transporting, storing, gathering and processing natural gas and natural gas liquids.
With its pipeline networks spread across more than 30,000 miles, The Williams Companies connects premium basins in the United States to the key market. WMB’s assets can meet 30% of the nation’s consumption of natural gas, which is utilized for heating purposes and clean-energy generation.