JPMorgan Downgrades Crestwood Equity, Crestwood Midstream; Sees No Immediate Catalysts

In a report published Tuesday, JPMorgan analysts downgraded the rating on

and

from Overweight to Neutral. In the absence of a distribution cut, there appear to be no near-term catalyst to reinvigorate investor confidence in Crestwood Midstream Partners and "drive further yield compression." "Given the risks that reduced Marcellus and Barnett drilling activity on CMLP's systems appears likely to persist for some time (coupled with uncertainty surrounding the KWK bankruptcy) absent a strong recovery, we see a more balanced risk/reward proposition given the lack of visibility to full coverage and growth," the analysts explained. Regarding Crestwood Equity Partners, there seems to be an "even longer road" to full distribution coverage, since a strategic combination is unlikely to materialize given that the company has been exploring these options for a long time now. In the report JPMorgan noted, "Our primary modeling changes include: 1) reducing gathering estimates amidst increased uncertainty on producer activity, 2) increasing cost cutting assumptions, and 3) other minor modeling adjustments." The price target for Crestwood Equity Partners has been reduced from $8.50 to $7.50, while that for Crestwood Midstream Partners has been revised downward from $18 to $17.