I’m pleased to offer our readers a first with this issue: The Midstream 50. This new, annual feature benchmarks the financial performance of the sector’s 50 largest public operators for the prior year. And what a year it was.
I don’t think many midstream executives reflect on 2015 with warmth and affection—certainly most investors don’t. I’m sure most of us, rather, hope that last year will prove to be a starting point for a growing, thriving and rewarding sector in years to come. May all the charts in future versions of The Midstream 50 feature revenue, profit and cash flow lines headed northeast. We plan to revisit The Midstream 50 annually to benchmark how the players perform over time.
Following up this fascinating cover story, written by Senior Editor Joseph Markman, is this issue’s edition of The Interview, featuring Brad Olsen, principal and portfolio manager with BP Capital Fund Advisors LLC. Olsen has been an active participant in the fi nancial side of the midstream during the sector’s explosive growth, and he has some convincing analysis of where we are and where we’re going. Together, these features make for some great reading.
There are signs of a turnaround in Wall Street’s interest in the sector after a dismal late 2015 and early 2016 when many investors shifted their portfolios into cosmetics, defense contractors or something else. I hope many of them return to the annual Master Limited Partnership Association investor conference, set for June 1-3 in Orlando. (You may know MLPA by its former name, the National Association of Publicly Traded Partnerships.) Midstream Business will be there once again.
Noting this renewed investor interest, Simmons & Co. began the second quarter with a research report announcing its resumed coverage, which reviewed the current and future prospects of the midstream very well: “Our MLP universe is diverse, but it is centered around traditional midstream asset holders, rather than companies with slightly less traditional assets (e.g., upstream, downstream, mining),” the investment banking firm said. “While the near-term cash flow generation capabilities of most tradi- tionally structured MLPs remain intact, the clarity of future op- erational growth and the associated cash distributions that have underpinned investor enthusiasm for the sector have been im- paired over the past 12 months, leading to an investor exodus.
“Accordingly, 2016 will likely be a year for detailed evaluation of future potential. Uncertainty still prevails and even some of the biggest names in the sector are currently trading with double-digit distribution yields. … We believe many MLPs have financing challenges, especially the longer the macro oil/gas environment remains in the current state of purgatory,” it said.
Sounding a similar note,Wells Fargo observed in a recent MLP research report that “the notion of the MLP model being ‘bro- ken’ is overstated in the market, in our view.”
Meanwhile, note the pending dead- line—June 1—for another new Midstream Business feature, the 2015 Midstream Ex- cellence Awards. I hope you take a few minutes to submit nominees for the com- petition’s three categories: executive of the year, deal of the year and project of the year. Winners will be announced at Hart Energy’s Midstream Texas conference, scheduled for Sept. 12-14 in San Antonio. Entries may be submitted via our website at www.midstreambusiness.com/excellence-awards.
Please note this is a combined May/June issue and we will have bimonthly issues for the balance of 2016. We’re responding to the current industry slowdown and hope to return to our regular publication schedule next year. Meanwhile, check our website, which will be featuring additional sector news items.