Can Midstream Energy Firms Weather a Volatile Energy Market?
The stock market is experiencing uncertainty stemming from Middle East tensions, which pushed oil prices higher and created lasting inflationary pressure. It is likely that investors, most of whom are risk-averse, are looking for stocks that can withstand the current market ups and downs.
The uncertainty and volatility have been reflected in wild oil price movements as conflicts in the Middle East continue to affect energy markets. However, not all stocks are affected by the ongoing challenges. Three midstream players, Kinder Morgan, Inc. KMI, MPLX LPMPLX and The Williams Companies, Inc.WMB, are well-poised to gain. Let's delve deeper.
Resilient Midstream Business
Stocks in the midstream space have lower exposure to volatility in commodity prices than oil and gas producers. This is because midstream players generate stable fee-based revenues since the transportation and storage assets are being booked by shippers for the long term. Hence, their business model is relatively low-risk, which indicates considerably less exposure to oil and gas prices and volume risks.
3 Pipeline Stocks to Gain: KMI, MPLX & WMB
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 78,000 miles, KMI is a leading energy infrastructure company in North America. It derives most of its earnings from take-or-pay contracts, generating stable fee-based revenues.
The midstream energy major is likely to grow on the back of its business model, which is relatively resilient to volume and commodity price risks.
MPLX: MPLX’s midstream business comprises transporting crude oil and refined products. The partnership generates stable cash flows from its long-term contracts with the shippers. Its crude oil and natural gas gathering systems also generate stable fee-based revenues.
The Williams Companies: The company is well-poised to capitalize on the mounting demand for clean energy since it is engaged in transporting, storing, gathering and processing natural gas and natural gas liquids.
With its pipeline networks spread across more than 30,000 miles, The Williams Companies connects premium basins in the United States to key markets. WMB’s assets can meet a considerable proportion of the nation’s natural gas consumption, which is utilized for heating purposes and clean energy generation.
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