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Plains GP Holdings LP Class A PAGP

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Why Is U.S. Midstream Still Undervalued With the Run-Up in Energy Prices?

Stephen Ellis Sector Strategist

Analyst Note

| Stephen Ellis |

With the recent recovery in U.S. oil and gas prices, many energy stocks have soared to fairly valued levels, while U.S. midstream continues to lag the rest of the space and remains undervalued. The space tilts toward more value than growth, considering the lack of near-term growth for many, but high yields and substantial excess cash flow after distributions, dividends, and capital spending to devote toward debt reduction and share and unit buybacks. Several U.S. midstream names (Enterprise Products Partners, Plains All American Pipeline, MPLX, and others) have been repurchasing units already. Considering current price to fair value and the quality of the business, we'd highlight Cheniere Energy as an idea worth considering.

We've yet to see a stronger midstream recovery for a few reasons, in our view.

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Company Profile

Business Description

Plains All American provides transportation, storage, processing, fractionation, and marketing services for crude oil, refined products, natural gas liquids, liquefied petroleum gas, and related products. Assets are geographically diverse, spanning the United States and in Alberta, Canada, but heavily concentrated in major U.S. shale basins like the Permian, Stack, and Bakken.

333 Clay Street, Suite 1600
Houston, TX, 77002
T +1 713 646-4100
Sector Energy
Industry Oil & Gas Midstream
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type Distressed
Employees 4,400