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3 Midstream Stocks That Can Weather Oil Market Volatility
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Key Takeaways
Kinder Morgan, MPLX and Williams stand out as midstream firms less exposed to oil price volatility.
KMI generates stable fee-based revenue through take-or-pay contracts across its 79,000-mile pipeline network.
WMB connects U.S. basins to markets via 30,000 miles of pipelines, supporting 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. Currently, the concerns that the Iran war could affect the global supplies of fuel have pushed the WTI crude oil price to $80 per barrel.
Oil prices are now highly volatile, and most energy companies are exposed to this volatility. However, 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, carrying a Zacks Rank #3 (Hold), 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. The partnership generates stable cash flows from its long-term contracts with the shippers. The #3 Ranked partnership’s crude oil and natural gas gathering systems also generate stable fee-based revenues. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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, with a Zacks Rank of 3, 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 Weather Oil Market 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. Currently, the concerns that the Iran war could affect the global supplies of fuel have pushed the WTI crude oil price to $80 per barrel.
Oil prices are now highly volatile, and most energy companies are exposed to this volatility. However, 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, carrying a Zacks Rank #3 (Hold), 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. The partnership generates stable cash flows from its long-term contracts with the shippers. The #3 Ranked partnership’s crude oil and natural gas gathering systems also generate stable fee-based revenues. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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, with a Zacks Rank of 3, 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.