Mizuho On EnLink Midstream: Permian Is Promising, But There's Uncertainty In Oklahoma

While EnLink Midstream LLC ENLC may continue delivering growth at its Permian segment, its Oklahoma segment needs to achieve several quarters of outlook stability before a re-rating of the stock takes place, according to Mizuho Securities.

The Analyst

Mizuho’s Gabriel Moreen initiated coverage of EnLink Midstream with a Neutral rating and a price target of $11.50.

The Thesis

EnLink Midstream has a strong positioning in Permian and is highly leveraged to production growth. The company may invest most of its capital in Permian post-2019, Moreen said.

He added, however, that there is further downside to the near-term consensus estimates, given the continued decline in Midcontinent rig counts through the second quarter.

Global Infrastructure Partners’ investment in EnLink Midstream underlines the private equity firm’s confidence in the company’s assets. Global Infrastructure Partners could act as a “potential backstop” for EnLink Midstream’s capital needs, the analyst said.

“Our Neutral rating stems in part from uncertainty in Oklahoma, but also from our view these issues are relatively well-understood by the market as reflected by ENLC's recent underperformance versus Midstream peer,” Moreen wrote in the note.

Price Action

Shares of EnLink Midstream declined about 1.7% to $9.90 at time of publishing on Thursday.