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.