Midstream Outlook: More Cash, Fewer Projects

For the first time in a while, the midstream sector is not anticipating a wave of new projects coming online, East Daley Analytics said in its annual Dirty Little Secrets report that explores midstream’s role in the future of energy.

Ajay Bakshani, capital markets analyst for East Daley and a co-author of the report, said the sector was primed to generate about $90 billion in cash over the next four years, based on research on the 25 companies the firm actively follows. The question for the East Daley team became: with fewer projects, how will that money be used?

“There’s going to be selective new infrastructure that’s needed, especially for gas and NGLs, and in the Permian and ArkLaTex,” Bakshani said. “And while we acknowledge that the energy transition, and especially carbon, is going to be a huge opportunity, there’s really a timing mismatch where large-scale projects are likely not going to be available during this 2021-2025 time frame, where we expect companies to generate over $90 billion in free cash flow. And this is free cash flow after already planned growth projects, planned distribution growth, as well as repurchases.”