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3 Midstream Stocks to Gain Amid Energy Market Volatility
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The initial pandemic period, when there were no vaccines, saw an environment of heightened uncertainties. The price of crude oil 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 $85 per barrel. The recent decision of Saudi Arabia and Russia to voluntarily extend oil production cuts until the end of the year, despite the commodity trading in bullish territory, is primarily aiding the crude rally.
Thus, it’s pretty apparent that the business model of most energy players, by nature, is exposed to extreme volatility in commodity prices. Hence, it would be wise for investors to keep an eye on midstream stocks like Kinder Morgan, Inc. (KMI - Free Report) , MPLX LP (MPLX - Free Report) and The Williams Companies Inc (WMB - 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 than oil and gas producers. 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. Hence, their business model is relatively low-risk, which indicates considerably less exposure to oil and gas prices and volume risks.
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 83,000 miles, KMI 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.
MPLX: The firm 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 buy back the remaining $846 million of its units.
The Williams Companies: It 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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3 Midstream Stocks to Gain Amid Energy Market Volatility
The initial pandemic period, when there were no vaccines, saw an environment of heightened uncertainties. The price of crude oil 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 $85 per barrel. The recent decision of Saudi Arabia and Russia to voluntarily extend oil production cuts until the end of the year, despite the commodity trading in bullish territory, is primarily aiding the crude rally.
Thus, it’s pretty apparent that the business model of most energy players, by nature, is exposed to extreme volatility in commodity prices. Hence, it would be wise for investors to keep an eye on midstream stocks like Kinder Morgan, Inc. (KMI - Free Report) , MPLX LP (MPLX - Free Report) and The Williams Companies Inc (WMB - 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 than oil and gas producers. 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. Hence, their business model is relatively low-risk, which 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 (Strong Buy) stocks here.
3 Stocks to Gain
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 83,000 miles, KMI 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.
MPLX: The firm 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 buy back the remaining $846 million of its units.
The Williams Companies: It 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.