One reason that crude oil has taken a beating over the past 60 days is an issue of oversupply, and despite the fact that Russia and OPEC have both committed to cuts in production, U.S. shale companies have ramped up production and the domestic rig count has soared. One way to work off the domestic glut is to export, and some of the top U.S. companies could be big winners.
A new Jefferies research report sees export growth as they only way to stabilize and most importantly, normalize U.S. inventories. In addition, the firm sees price volatility as foreign demand (via export) comprises a larger component of total U.S. crude off-take. The report noted this:
U.S. crude continued to gain market share in new regions, including Asia & India. With an expectation for domestic refined product demand to remain subdued against a sharp rise in US light-oil output, we expect crude exports will climb meaningfully through the decade’s end in order to keep US inventories balanced.
The analysts see five big winners, and given the pullback in oil prices, and in turn share prices, now may be an excellent time for investors to find an entry point.
Enterprise Products Partners
This is one of the largest publicly traded master limited partnerships (MLPs) 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. The report noted this:
The company has steadily transformed itself into a major US exporter of numerous hydrocarbon products, acting as the straddle for constrained domestic supplies increasingly seeking international liberation. It is today the largest exporter of ethane and LPG, and a major exporter of both crude oil and refined products.
Investors receive a 6.36% distribution. The Wall Street consensus price target is $32.96, and shares closed Thursday at $26.00.
This is one of the most recommended energy companies on Wall Street, and it looks to reclaim its preeminent position. Kinder Morgan Inc. (NYSE: KMI) is one of the largest energy midstream companies, with diverse operations across the midstream energy value chain. Businesses include natural gas pipelines, liquids terminalling, CO2 production, as well as products pipelines.
The analysts see many positives and noted this:
According to its 2017 Analyst Day presentation, Kinder Morgan’s Houston Ship Channel (HSC) terminal network is the largest integrated refined product terminalling system in the world with ~43 MMBbls of capacity being fed by 20 inbound pipelines via 10 Houston area refineries. In addition, the company operates 11 ship docks with an ability to tap international markets via exports.
Shareholders receive a 2.68% dividend. The consensus price target is $25.14, and shares closed Thursday at $18.58.