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 development of vaccines, which led to the gradual opening of the economy, the pricing scenario of West Texas Intermediate crude improved drastically over time to reach $123.64 per barrel on March 8, 2022. Oil price data are per the U.S. Energy Information Administration.
Currently, WTI oil prices are trading at more than $70 per barrel. 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 Quick Quote KMI - Free Report) , MPLX LP ( MPLX Quick Quote MPLX - Free Report) and The Williams Companies Inc ( WMB Quick Quote 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 shippers are booking the transportation and storage assets 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. While one stock sports a Zacks Rank #1 (Strong Buy), the remaining two have 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, carrying a Zacks Rank #3, is poised to grow on the back of its business model, which is resilient to volume and commodity price risks.
MPLX: The firm, with a Zacks Rank of 3, has ownership and operating interests in midstream energy infrastructure and logistics assets, thereby generating stable cash flow. 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 engages in transporting, storing, gathering and processing natural gas and natural gas liquids.
With its pipeline networks spread across more than 30,000 miles, The Zacks Rank #1 company 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.