Analysis: Midstream companies benefit from Permian production

By Staff | September 04, 2018

A new analysis from East Daley Capital Advisors highlights general growth during the second quarter in the oil and gas midstream sector—primarily as a result of increased production in the Permian Basin.

EDC’s analysis suggested strong earnings are expected to continue for midstream companies with exposure to the Permian Basin. These companies include Energy Transfer Partners, Enterprise Products Partners and Plains All American.

The report said this trend will continue for the near term as the Permian’s increased growth helps producers exceed expectations. The analysis indicated companies also benefited from operational leverage, higher walk-up tariff rates and improved marketing profits.

The EDC analysis noted that, as expected, ONEOK put up strong numbers in the second quarter from production growth in the Bakken, as well as NGL marketing uplift realized on its Sterling III Pipeline. The company raised its guidance for 2018, partly because of NGL optimization and marketing results.

EDC noted that the only large-scale Permian takeaway project in the next year is the Plains All American Sunrise Pipeline expansion, expected to begin operation during the fourth quarter this year.

EDC said TC Pipelines second quarter earnings typically include large swings for seasonality, which shows up in its contract-by-contract analysis. Magellan Midstream Partners came in lower than EDC’s estimate for the second quarter because of higher operational expenditures, general and administrative costs and lower distributions in excess of equity earnings than expected.

EDC said it remains optimistic about the fundamental cash flow generating ability of the industry. It will highlight the companies with most upside potential relative to the street for next year in the 2019 Guidance Outlook scheduled for October 2018.