With everybody returning to Wall Street from the holidays, the focus is now squarely on 2017 and what makes sense. One thing that looks solid is the prospects for oil. While the halcyon days of 2014 and $100 a barrel should stay in the rear-view mirror, the prospects for a stay between $50 and $60 this year look good, and that bodes well for many producers, especially those out in the Permian and other top onshore shale areas.
A recent research report from Stifel is cautiously optimistic on the prospects for 2017, and the firm also feels that energy master limited partnership (MLP) yields are very favorable compared to other equity income classes like utilities. The report said in its overview”
The operating environment in general as domestic production stabilizes with a Healthier E&P customer appears to be the most noteworthy and positive trend For energy infrastructure. The specter of rising interests may challenge performance. Although our analysis minimizes our concerns. Cost of capital will continue to be a Focal point given the industry’s dependence on external funding and perpetual equity Issuance. Assets exposed to the NGL barrel, particularly ethane and LPG exports, should reap benefits in 2017.
These six companies made the Stifel Select List, and all are rated Buy.
Enterprise Products Partners
This is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) once again, despite the energy slump, recently raised its distribution 1%. The company maintains a very good long-term position in the market. It provides many of its services on the basis of long-term, fixed-fee contracts, insulating against some of the wilder swings of the commodities that it trades in.
One reason why many analysts may like the stock might be its distribution coverage ratio. The company’s distribution coverage ratio is well above one times, making it a relatively less risky MLP. Its distributions have grown for several quarters, and last quarter Enterprise Products announced that the board of directors of its general partner declared an increase in the quarterly cash distribution paid to partners to $0.405 per common unit, or $1.62 per unit on an annualized basis.
Investors receive a 6.0% distribution. The Stifel price target for the stock is $32, and the Wall Street consensus target is $31.88. Shares closed last Friday at $27.04.
Cone Midstream Partners
This company has had a great run off the lows last February but is still down from highs posted in 2014. Cone Midstream Partners L.P. (NYSE: CNNX) is a growth-oriented MLP recently formed by CONSOL Energy and Noble Energy to own, operate, develop and acquire natural gas gathering and other midstream energy assets to service its sponsors’ production in the Marcellus Shale in Pennsylvania and West Virginia.
The company’s assets include natural gas gathering pipelines and compression and dehydration facilities, as well as condensate gathering, collection, separation and stabilization facilities. Its gathering assets comprise a network of 244 miles of gathering pipelines with an average daily throughput of approximately 1,099 Bcfe/d and 15 compression and dehydration facilities. It also operates two condensate-handling facilities with handling capacities of 2,500 Bbl/d each in Majorsville, Pennsylvania, and Moundsville, West Virginia, that provide condensate gathering, collection, separation and stabilization services. It also operates other partnership assets.
Unitholders receive a 5.64% distribution. Stifel has a $26 price target. The consensus figure is $23.90. Shares closed last Friday at $23.55.