Fossil fuel companies have experienced an unprecedented rise in their profits, raking in billions of dollars in the first nine months of this year. In the third quarter, gas prices in the country have increased by 50% year-over-year to an average of $3.40 per gallon. After posting solid gains earlier in the week, oil prices steadied at around $75 per barrel on December 8.
The United States Energy Information Administration (EIA) estimated that four billion cubic feet per day (Bcf/d) of new natural gas pipeline capacity has entered into the service over the third quarter of this year. Moreover, the oil and gas pipeline market worldwide is expected to increase at a CAGR of more than 6% from 2021 to 2026.
Given this favorable backdrop, it might be profitable to scoop up these fundamentally strong oil and gas pipeline stocks Enterprise Products Partners L.P. (EPD), MPLX LP (MPLX), Oasis Midstream Partners LP (OMP), and Martin Midstream Partners L.P. (MMLP), and take advantage of their recent dips.
Enterprise Products Partners L.P. (EPD)
EPD is a midstream energy services provider of crude oil, natural gas, natural gas liquids (NGLs), petrochemicals, and refined products. The company operates through the four broad segments of NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services; and Petrochemicals & Refined Products Services.
On October 12, EPD declared a quarterly distribution of $0.45 per unit, amounting to $1.80 per unit on an annualized basis, which was payable to limited partners holding EPD common units, on November 12, 2021. The distribution reflects upon the strength in the company’s cash position.
In September, Chevron U.S.A. Inc., a part of the Chevron Corporation (CVX) and an EPD subsidiary, unveiled a framework to study and evaluate carbon dioxide capture, utilization, and storage (CCUS) from their respective business units. The joint study is expected to manage the companies’ carbon footprint and support the transition to a lower-carbon economy.
For the fiscal third quarter ended September 30, EPD’s revenues increased 56.5% year-over-year to $10.83 billion. Operating income rose 9.4% from the prior-year quarter to $1.51 billion. Net income and earnings per common unit came in at $1.18 billion and $0.52, respectively, up 9% and 8.3% from the same period last year.
The consensus EPS estimate of $0.54 for the current quarter (ending December 2021) indicates a 260% year-over-year increase. Likewise, the consensus revenue estimate for the ongoing quarter of $10.05 billion reflects an improvement of 42.7% from the prior-year quarter.
The stock has gained 7.4% year-to-date but declined marginally intra-day to close yesterday’s trading session at $21.03. It is currently trading 18.1% below its 52-week high of $25.69.
EPD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
EPD has a Value and Stability grade of B. In the 36-stock MLPs – Oil & Gas industry, it is ranked #13. The industry is rated A. Click here to see the additional POWR Ratings for EPD (Growth, Momentum, Sentiment, and Quality).
MPLX LP (MPLX)
MPLX is the owner and operator of midstream energy infrastructure and logistics assets located primarily in the United States. The company operating under the segments of Logistics and Storage; and Gathering and Processing, engages in the transportation of natural gas, NGLs, crude oil, refined petroleum products, and other hydrocarbon-based products. It is a subsidiary of Marathon Petroleum Corporation (MPC).
On November 16, MPLX announced that its subsidiary, Tesoro High Plains Pipeline Company LLC, had launched a binding open season to compute shipper interest for obtaining firm service on its new expansion capacity in Dunn County, North Dakota. The proposed expansion capacity is expected to provide gathering services from additional origin points, eventually adding to the company’s revenue stream.
MPLX’s total revenues and other income increased 13.9% year-over-year to $2.56 billion in the fiscal third quarter ended September 30. Income from operations improved 14.7% from the same period last year to $1.03 billion. Net income and net income per limited partner unit attributable to MPLX rose 20.6% and 21.3% from the prior-year quarter to $802 million and $0.74.
Analysts expect MPLX’s EPS to increase 19% year-over-year to $0.75 in the current quarter (ending December 2021). Likewise, Street expects revenue to rise 10.3% from the prior-year quarter to $2.48 billion in the ongoing quarter.
MPLX’s shares have gained 30.8% over the past year to close yesterday’s trading session at $29.86. However, it has declined 4.2% over the past month. It is currently trading 7.4% below its 52-week high of $32.26.
It’s no surprise that MPLX has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a B grade for Stability and Quality. It is ranked #5 in the MLPs – Oil & Gas industry.
To see the additional POWR Ratings for Growth, Value, Momentum, and Sentiment for MPLX, click here.
Oasis Midstream Partners LP (OMP)
OMP operates as a crude oil, natural gas, and water-related midstream services provider in North America. Its offerings include natural gas gathering, compression, processing, and gas lift supply services. The company was formed as an exclusive master limited partnership by Oasis Petroleum Inc. (OAS).
On October 26, Crestwood Equity Partners LP (CEQP) announced entering into a definitive merger agreement to acquire OMP in an equity and cash transaction valued at approximately $1.80 billion. About the acquisition, Danny Brown, Chief Executive Officer of OAS, and Chairman of OMP, said, “The combination of Crestwood and Oasis Midstream creates a midstream leader well-positioned with size, scale, and a diversified customer base. Crestwood’s experienced team brings a track record of operational excellence to handle a large portion of our company’s hydrocarbons and produced water in the Williston Basin. Oasis Midstream unitholders, including Oasis Petroleum, are receiving compelling value in this transaction and will benefit from an ownership position in a larger combined company that will have a strong balance sheet and pay attractive distributions.”
For the three months ended September 30, OMP’s total revenues increased 24.6% year-over-year to $105.38 million. Operating income rose 4.7% from the prior-year quarter to $48.68 million. Net income attributable to OMP stood at $37.62 million, registering an increase of 38% from the same period last year.
Street EPS estimate for the ongoing year (fiscal 2021) of $3.14 reflects an increase of 46% from the prior year. Likewise, Street revenue estimate of $380 million for the current year indicates a 9.2% year-over-year improvement.
Over the past year, the stock has gained 78.4% to close yesterday’s trading session at $22.78. On the other hand, it has declined 9.5% over the past month. The stock is presently trading 36.2% below its 52-week high of $35.70.
OMP’s promising prospects are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. OMP has a Quality grade of A and a Value and Sentiment grade of B. It is ranked #6 in the same industry.
Click here to see the POWR Ratings for Growth, Momentum, and Stability for OMP.
Martin Midstream Partners L.P. (MMLP)
MMLP operates in the processing, storage, and packaging of petroleum products, primarily in the Gulf Coast of the United States. The company functions through Terminalling and Storage; Transportation; Sulfur Services; and Natural Gas Liquids segments.
On November 29, MMLP announced that it had executed an amended limited partnership agreement with its general partner, Martin Midstream GP LLC, that eliminates the partner’s incentive distribution right (IDRs). The deal is expected to remove financial complexity for the company and provide long-term value to its unitholders.
For the fiscal third quarter ended September 30, MMLP’s total revenues increased 38.5% year-over-year to $211.26 million. For the nine months ended September 30, net cash provided by financing activities came in at $27.86 million, up substantially from its negative year-ago value, while its cash balance improved 264.3% from the same period last year to $6.78 million.
The consensus EPS estimate of $0.28 for the next quarter (ending March 2022) indicates a 366.7% year-over-year increase. Likewise, the consensus revenue estimate for the upcoming quarter of $43.21 million reflects an improvement of 26.6% from the prior-year quarter.
The stock has gained 52% over the past year but declined 4.1% over the past month to close yesterday’s trading session at $3.01. It is currently trading 18% below its 52-week high of $3.67.
MMLP has an overall rating of B, which translates to Buy in our POWR Rating system. The stock has a B grade for Momentum and Quality. It is ranked #4 in the same industry.
In addition to the POWR Rating grades we’ve stated above, one can see MMLP ratings for Growth, Value, Stability, and Sentiment here.
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EPD shares rose $0.04 (+0.19%) in after-hours trading Wednesday. Year-to-date, EPD has gained 16.65%, versus a 26.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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