SunTrust Likes Those That 'Have' In Midstream Sector

A "have" and "have-not" scenario is unfolding in the midstream energy sector, with some firms hard hit by producers' pullback and others seeing strong demand for new projects, an analyst said. SunTrust's Tristan Richardson launched coverage on seven companies in the sector, rating four players at Buy and three at Neutral. Richardson likes prospects for Kinder Morgan Inc

, Rice Midstream Partners LP

, Enterprise Products Partners L.P.

and Markwest Energy Partners LP

. The analyst favors companies with imminent and realistic plans for capital spending, along with exposure to the Marcellus and Utica basins in Appalachia and firms that offer storage and export services. Among limited partnerships, "a clear path to distribution growth from visible assets at a sponsor that are operational with a track record" can help spur confidence, Richardson said. Earning Neutral ratings from Richardson: Valero Energy Partners LP

, Blueknight Energy Partners L.P

and Summit Midstream Partners LP

. Richardson put a $48 target on Kinder Morgan, the largest U.S. midstream services provider, and said it has a substantial backlog of projects backed by customer commitments. Rice Midstream, with a $22 target from Richardson, serves the Utica and Marcellus basins which have seen fewer rig count reductions than other regions. Rice's operations are poised to grow, Richardson said. Enterprise Products is a market leader with an extensive backlog according to Richardson, who put a $39 target on the company. MarketWest, with a $76 target from Richardson, is focused on the Marcellus and Utica basins, "two gas regions that offer some of the highest producer returns in the U.S.," Richardson said.