Against the Wind - Assessing Midstream Company Performance After a Decade of Record Investment

For many midstream companies, the experience of the past 12 months has been akin to falling down a flight of stairs. The fortunate sit at the bottom — stunned a bit, with arms and legs akimbo — and gradually determine that they’re generally alright, and that they’ll be more careful next time. The less lucky? They’re banged up and bloodied, and maybe headed to the ER and, after that, weeks of physical therapy. But were the “fortunate” really just lucky? Or were they in better shape, more athletic, more prepared for any eventuality? And what about companies when they’re hit hard with a sudden, negative shift in market conditions, out of the blue? Today, we discuss highlights from the second part of East Daley Capital’s 2021 edition of Dirty Little Secrets report, which examines the assets and outlooks of 26 leading midstream companies. We’ll focus on two representative midstreamers: Energy Transfer and EnLink Midstream.

Much the way that COVID-19 accelerated the trends toward working from anywhere, shopping online, and exercising at home, the pandemic and its far-reaching energy-market effects fast-forwarded the challenges that many North American midstream companies had been expecting to face more gradually through the 2020s. The good news — if you can call it that — is that a lot of economic pain was front-loaded into the past 10 months. The bad news is that a sizable subset of midstreamers is saddled with too much capacity in shale basins where drilling activity and production are down sharply. For them, there’s still more pain ahead, even bankruptcy in a few cases. In today’s blog, we discuss highlights from the newly released 2021 edition of East Daley Capital’s Dirty Little Secrets report about what’s ahead for the midstream sector and 27 leading companies within it.

As a most eventful decade for the U.S. energy industry draws to a close and 2020 looms, it’s a perfect time to consider what’s ahead for the midstream sector — and, more important from an investor’s standpoint, for the individual companies within it. The last few years have driven home the point that while all midstreamers are impacted to some degree by what happens on a macro-level, the relative success of each company is tied to the myriad decisions its leaders make over time regarding which basins and hubs to focus on and which assets to build, expand, acquire or divest. Assessing these micro-level assets and the contributions they each make to a company’s bottom line requires particularly deep analysis. Today, we discuss key themes and findings from East Daley Capital’s newly issued 2020 Midstream Guidance Outlook.