Goldman On Pipelines, MLPs: Archrock, Delek Upgraded; USA Compression Downgraded

Goldman Sachs has upgraded its rating on Archrock Partners LP APLP and Delek Logistics Partners LP DKL and downgraded USA Compression Partners LP USAC.

Broad Trends

In its report published Monday, Goldman Sachs noted it expects 10-year Treasury yield to stay below 3 percent through 2017, serving as a positive driver for midstream valuation and cost of capital.

Referring to oil, the analysts stated they are more confident in the medium term call on U.S. production — which will boost utilization rates — but are uncertain concerning the near-term outlook, taking into account the overcapacity and new market entrants.

Furthermore, Goldman Sachs maintains its bullish view on natural gas "given growing supply (Marcellus/Utica) and demand (industrial, LNG, power, Mexico)."

Related Link: Marathon Oil Has Significant Upside: Citi Raises Target To $16

The analysts reduced their median midstream target yield to 7.5 percent from 8.1 percent estimated previously, which implies 13 percent up movement. The investment bank gave a Buy rating to both Archrock Partners and Delek Logistics Partners, taking into consideration "attractive relative valuation and upside growth opportunity".

Ratings And Targets