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Looking Beyond Oil Prices: 3 Midstream Stocks With Resilient Business Models
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Key Takeaways
Kinder Morgan earns mostly from take-or-pay contracts across 78,000 miles of pipelines.
MPLX generates stable cash flows from long-term shipper contracts and fee-based gathering systems.
Williams operates more than 30,000 pipeline miles linking U.S. basins to key natural gas markets.
The outlook for the U.S.-Iran conflict remains uncertain after the recent U.S. strikes, with President Donald Trump saying it is unclear whether the situation will stabilize or escalate further. As a result, uncertainty persists, and the oil and energy markets are likely to remain volatile.
Renewed tensions, with the United States and Iran having already exchanged intense attacks, could disrupt oil flows through the Strait of Hormuz. At the same time, inflation and broader economic concerns may weigh on global oil demand.
Therefore, the near-term direction of West Texas Intermediate crude oil prices, currently trading below the $75-per-barrel mark, remains uncertain, creating volatility across the energy sector. However, not all stocks are affected. Three midstream players like Kinder Morgan, Inc. (KMI - Free Report) , MPLX LP (MPLX - Free Report) and The Williams Companies, Inc. (WMB - Free Report) are well-poised to gain. Let's delve deeper.
Resilient Business Model of Midstream Business
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 Keep an Eye on: KMI, MPLX & WMB
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 78,000 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.
MPLX: MPLX’s midstream business comprises transporting crude oil and refined products. The #3 Ranked partnership generates stable cash flows from its long-term contracts with the shippers. Its crude oil and natural gas gathering systems also generate stable fee-based revenues.
The Williams Companies: The company 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.
View the Zacks #1 Rank List
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Looking Beyond Oil Prices: 3 Midstream Stocks With Resilient Business Models
Key Takeaways
The outlook for the U.S.-Iran conflict remains uncertain after the recent U.S. strikes, with President Donald Trump saying it is unclear whether the situation will stabilize or escalate further. As a result, uncertainty persists, and the oil and energy markets are likely to remain volatile.
Renewed tensions, with the United States and Iran having already exchanged intense attacks, could disrupt oil flows through the Strait of Hormuz. At the same time, inflation and broader economic concerns may weigh on global oil demand.
Therefore, the near-term direction of West Texas Intermediate crude oil prices, currently trading below the $75-per-barrel mark, remains uncertain, creating volatility across the energy sector. However, not all stocks are affected. Three midstream players like Kinder Morgan, Inc. (KMI - Free Report) , MPLX LP (MPLX - Free Report) and The Williams Companies, Inc. (WMB - Free Report) are well-poised to gain. Let's delve deeper.
Resilient Business Model of Midstream Business
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 Keep an Eye on: KMI, MPLX & WMB
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 78,000 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. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MPLX: MPLX’s midstream business comprises transporting crude oil and refined products. The #3 Ranked partnership generates stable cash flows from its long-term contracts with the shippers. Its crude oil and natural gas gathering systems also generate stable fee-based revenues.
The Williams Companies: The company 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.