Western Gas Could Outperform Peers In 2018

Citing the bright prospects for Western Gas Partners, LP WES in 2018 and beyond, Stifel upgraded shares of the company. The firm said a number of accomplishments in 2017 places the company on track for strong growth into 2018.

As such, the firm upgraded shares of Western Gas from Hold to Buy, while it maintained its $54 price target. The upgrade was premised on the recent pullback and the firm's expectations of robust cash flow growth in 2018 and beyond.

Delving on the milestones in 2017, analysts Selman Akyol and Tim Howard said the company announced a second Delaware Basin complex, two additional processing plants in the DJ Basin, slated for 2019, pressed first water infrastructure into service, converted its preferred units into common stock, settled a deferred dropdown payment with Anadarko Petroleum Corporation APC and opted to defer conversion of Class C units to 2020 from 2017.

Thus, the analysts noted that the company completed transactions to strengthen its capital structure, removing equity market requirements in 2017. The analysts expect this to continue well into 2018.

Stifel said the Anadarko support gives it confidence in Western Gas' growth, suggesting that a lifeline is available if the macroenvironment turns sour.

"With robust organic spending, a clean capital structure and highly supportive sponsor, we believe Western is set to outperform peers in 2018 and beyond," Stifel said. The firm believes the company can maintain 7 percent annual distribution growth, with coverage of about 1.1 times.