Enable Midstream Partners (ENBL +0.9%) is initiated with a Hold rating and $16 price target at Stifel, which says ENBL has one of the enviable gathering and processing footprints in the emerging SCOOP/STACK plays and continues to generate most of its margin through fee-based contracts.
Despite the attractive footprint and contract mix, the firm feels ENBL merits only a Hold rating as the partnership currently trades at an EV/NTM LP adjusted EBITDA multiple of 12.1x its estimate, modestly below its peer comp group of 13.7x on average but above its trailing one-year average of 11.3x and in line with its trailing six-month average.
Based on the debatable supposition that spending on maintenance can be equated with safety, CFRA energy research chief Stewart Glickman offers his four favorite energy pipeline companies ranked by spending on maintenance as a percentage of total assets during 2011-15.
Glickman calculates $148M in maintenance spending at EQT Midstream Partners (EQM -3%) during the period comprised 10.8% of its average assets, ranking at the top of 23 companies reviewed; the firm rates units as a Buy.
Spectra Energy Partners (SEP -1.4%) owns 15K-plus miles of transmission and transportation pipelines, and maintenance spending of $1.31B comprised 9.4% of its average assets, ranking second; units are not rated at CFRA.
Magellan Midstream (MMP -1.7%) owns and operates the longest common carrier pipeline system for refined products and liquefied petroleum gases in the U.S., and its $377M in maintenance spending equaled 7.6% of average assets, ranking third; MMP is rated a Strong Buy.
Maintenance spending at Enable Midstream Partners (ENBL -1.4%) totaling $619M comprised 6.1% of its average assets, ranking fourth; unit are rated Hold.
Goldman Sachs upgrades its coverage on energy midstream partnerships to Attractive from Neutral, expecting a return of volume growth in 2017 and further growth in natural gas liquids, oil and natural gas helping to generate better margins.
The firm foresees few risks of any additional dividend cuts, as leverage and coverage should show improvements in 2017 and 2018, and believes financial risks from capital markets have begun to recede.
Goldman upgrades two names - Targa Resources (TRGP +3%) and Buckeye Partners (BPL +1.8%) - to Buy from Neutral, and lifts two more - Enable Midstream Partners (ENBL +3%) and Enbridge Energy Partners (EEP +0.9%) - to Neutral from Sell; however, EnLink Midstream (ENLC -0.5%) is downgraded to Sell.
CenterPoint Energy (CNP -2.5%) says it will no longer pursue forming a REIT structure for its utility business, deciding that the potential to create long-term shareholder value via a REIT is "very limited and does not justify exposure to the associated risks."
In reporting smaller than expected Q2 earnings, CNP says its natural gas business was hurt by a mild winter that reduced gas demand, and results were weighed down by its Enable Midstream Partners (ENBL +2.5%) joint venture, which also posted below consensus Q2 earnings.
Fellow ENBL partner OGE Energy (OGE -0.9%) said yesterday that CNP is offering to sell its ENBL stake to OGE.
CNP also reaffirms guidance FY 2016 EPS guidance of $1.12-$1.20 vs. $1.15 analyst consensus estimate.
The Baird group does not necessarily recommend investors buy all the MLPs on the list, but "ample market evidence exists a) to justify a cut, and b) to believe it will drive short run returns, though not without material implications to investors’ cash flow."
Barclays downgrades some MLP names on valuation, cutting Enable Midstream Partners (ENBL -2.1%) and TC Pipelines (TCP +1.6%) to Underweight from Equal Weight and lowering PennTex Midstream Partners (PTXP +0.5%) and EnLink Midstream (ENLC -3.2%) to Equal Weight from Overweight.
The firm notes that ENBL has gained 56% YTD and is cautious about re-contracting risk on certain assets that could be a headwind to the company’s growth, and worries that TCP's prospects for dropdowns have become less certain given parent TransCanada’s pending acquisition of Columbia Pipeline.
Barclays believes PTXP has a favorable organic growth opportunity given the location of its assets where drilling economics are positive and producers have transportation advantages, but that the positive aspects are fully priced in.
The firm also notes ENLC's 350 bps premium to its LP, EnLink Midstream Partners (ENLK -1.5%), and is not forecasting distribution growth in 2016-17.