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3 Midstream Stocks That Can Sail Through Energy Volatility
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Key Takeaways
Kinder Morgan earns most of its revenue from long-term take-or-pay contracts across 79,000 miles of pipelines.
MPLX secures stable cash flows through crude oil and refined product transport under long-term agreements.
Williams connects U.S. premium basins to markets with 30,000 miles of pipelines serving natural gas demand.
During the initial phase of the pandemic, when vaccines were unavailable, the world faced significant uncertainties. Crude oil prices experienced an unprecedented plunge, falling to a negative $36.98 per barrel on April 20, 2020. However, the rapid development and rollout of vaccines facilitated the gradual reopening of economies, leading to a remarkable recovery in the pricing of West Texas Intermediate (WTI) crude, which soared to $123.64 per barrel by March 8, 2022. Oil price data are from the U.S. Energy Information Administration.
This highlights the inherent exposure of most energy companies to extreme volatility in commodity prices. However, unlike most energy companies, Kinder Morgan, Inc. (KMI - Free Report) , MPLX LP (MPLX - Free Report) and The Williams Companies, Inc. (WMB - Free Report) are not highly vulnerable to commodity prices.
Midstream Business: Resilient to Price Volatility
Although the fate of energy players is highly dependent on oil and gas prices, stocks in the 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.
3 Pipeline Stocks to Gain: KMI, MPLX, WMB
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 79,000 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.
The midstream energy major is likely to grow on the back of its business model, which is relatively resilient to volume and commodity price risks.
MPLX: MPLX’s midstream business comprises transporting crude oil and refined products. Thus, the partnership generates stable cash flows from its long-term contracts with the shippers. The partnership’s crude oil and natural gas gathering systems also generate stable fee-based revenues.
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 a considerable proportion of the nation’s natural gas consumption, which is utilized for heating purposes and clean-energy generation.
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3 Midstream Stocks That Can Sail Through Energy Volatility
Key Takeaways
During the initial phase of the pandemic, when vaccines were unavailable, the world faced significant uncertainties. Crude oil prices experienced an unprecedented plunge, falling to a negative $36.98 per barrel on April 20, 2020. However, the rapid development and rollout of vaccines facilitated the gradual reopening of economies, leading to a remarkable recovery in the pricing of West Texas Intermediate (WTI) crude, which soared to $123.64 per barrel by March 8, 2022. Oil price data are from the U.S. Energy Information Administration.
This highlights the inherent exposure of most energy companies to extreme volatility in commodity prices. However, unlike most energy companies, Kinder Morgan, Inc. (KMI - Free Report) , MPLX LP (MPLX - Free Report) and The Williams Companies, Inc. (WMB - Free Report) are not highly vulnerable to commodity prices.
Midstream Business: Resilient to Price Volatility
Although the fate of energy players is highly dependent on oil and gas prices, stocks in the 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.
3 Pipeline Stocks to Gain: KMI, MPLX, WMB
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 79,000 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.
The midstream energy major is likely to grow on the back of its business model, which is relatively resilient to volume and commodity price risks.
MPLX: MPLX’s midstream business comprises transporting crude oil and refined products. Thus, the partnership generates stable cash flows from its long-term contracts with the shippers. The partnership’s crude oil and natural gas gathering systems also generate stable fee-based revenues.
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 a considerable proportion of the nation’s natural gas consumption, which is utilized for heating purposes and clean-energy generation.