Midstream companies facilitate the transport and storage of petroleum products for upstream and downstream companies alike. Midstream companies own pipelines and storage terminals and they charge their customers fees for the amount of petroleum products that flow through their systems. These companies also charge for their storage-site services, attracting other companies with a one-stop solution. Let’s analyze three midstream companies to find out which one of them has the best potential to exploit the coming changes in the oil-and-gas sector. These companies are El Paso Pipeline Partners, L.P. (NYSE:EPB), Energy Transfer Equity, L.P. (NYSE:ETE) and Magellan Midstream Partners, L.P. (NYSE:MMP).
Focus on LNG
El Paso Pipeline Partners, L.P. (NYSE:EPB) provides services related to the interstate natural gas transportation and terminaling facilities in the United States. Along with its pipelines, the company also owns an LNG storage and re-gasification terminal near Savannah, Ga.
In recent quarterly results, the company has missed on its revenue and earnings-per-share estimates. Other than that, the gross margins and operating margins of the company grew, whereas its net margins contracted. The company’s Elba Express Phase B expansion project was completed in April 2013. The project added 10,000 horsepower at a new compressor station located in Hart County, Georgia. This has allowed the company to receive 220 MMcf/d (millions of cubic feet per day) of natural gas supply for deliveries to markets present on the company’s network in the Southeast. The markets in the Southeast are made up of end-users who demand natural gas. The company is also working on two liquefaction projects, namely Elba Island Liquefaction Project and GLNG Liquefaction Project. This would allow the company to export LNG to the FTA countries. I believe that this move into the LNG business will be highly profitable for the firm in the coming years.
Beating analysts’ estimates
Energy Transfer Equity, L.P. (NYSE:ETE) is a diversified energy company that provides energy-related services. The company sells natural gas to a variety of end users such as electric utilities, power plants, industrial end users, etc. The company’s trailing 12-month revenues are its highest, but they were largely overshadowed by its operating expenses.
The outlook for the company has been very positive in the market as its fourth-quarter 2012 and first-quarter 2013 results were way above the estimates calculated by the analysts. This helped the company achieve a significant increase in its share prices. For the second quarter of 2013, analysts are estimating revenue figures close to $11.3 billion. The EPS estimates have also been increased by the analysts. The company will be counting on its several projects to deliver that; its Trunkline LNG export facility has great potential. The facility will have an export capacity of up to 15 mtpa (million metric tons per annum). It will continue to provide additional upstream transportation revenue. Energy Transfer Equity, L.P. (NYSE:ETE) is expecting to get a DOE non-FTA export permit for this facility this year.
Expansion efforts
Magellan Midstream Partners, L.P. (NYSE:MMP) engages in the transportation, storage and distribution of petroleum products in the United States. The company has entered into several joint-ventures which will start to bear fruit starting from the end of this year. The company started the delivery of crude oil to the Houston region from its Longhorn pipeline. The volumes from this pipeline are set to expand almost by 150% from their initial levels. Eight-hundred miles of Plains All American’s pipeline is also going to come under the Mangellan’s control.
What’s more: Mangellan is currently working on six more projects that will take crude from various locations in Texas and Oklahoma to refineries along the Gulf Coast. This would allow the company to transport up to 2 million barrels of crude oil a day. I believe the earnings at Magellan Midstream Partners, L.P. (NYSE:MMP) have just started
The takeaway
The midstream companies are enjoying a revival of activities in the oil-and-gas sector of the United States. From the above-mentioned companies, I expect Magellan Midstream Partners, L.P. (NYSE:MMP) to report solid profits in the coming years.
The article Three Midstream Companies to Consider originally appeared on Fool.com and is written by Awais Iqbal.
Awais Iqbal has no position in any stocks mentioned. The Motley Fool recommends El Paso Pipeline Partners LP and Magellan Midstream Partners, L.P. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
