"There are a lot of growth opportunities" following Richard Kinder's suggestion that he'll be looking to acquire rival pipeline operators, says Global Hunter analyst Sunil Sibal, who considers MarkWest Energy (NYSE:MWE) and Targa Resources (NYSE:TRGP) as prime buyout candidates.
MWE processes and transports natural gas from U.S. shale basins including the Marcellus and Utica, while TRGP has a footprint in the Permian and Bakken, as well as one of the Gulf coast’s two commercial export terminals for natural gas liquids - "assets which are very desirable in the current production growth environment,” Sibal says.
MarkWest Energy (MWE +0.4%) is upgraded to Buy from Hold with an $83 price target, up from $68, at Wunderlich after recently providing a positive operations update that should instill greater confidence about its execution plans.
The firm says MWE is developing a premier midstream footprint in the Marcellus and Utica plays, with 12 major projects under construction of which five are expected to be completed this year; much of 2014 capital needs already are pre-funded, the firm adds.
As asset utilization ramps up, Wunderlich believes accelerating cash flows will generate a long-term and sustainable double-digit growth trajectory.
SunCoke Energy (SXC +3.8%) is added to Goldman Sachs' Conviction Buy List, citing potential catalysts that include buybacks and introduction of a dividend, tuck-in acquisitions and a potential sale of the coal business; shares are Buy rated with a $27 price target.
Goldman also adds MarkWest Energy (MWE +0.2%) on its updated list, but it's not enjoying the same bump as SXC; shares are Buy rated with a $78 target.
Summit Midstream Partners (SMLP) exercises its option to pay $377M to buy a 40% equity stake in Ohio Gathering Co. and Ohio Condensate Co. from affiliates of MarkWest Energy (MWE) and The Energy & Minerals Group.
Ohio Gathering is now gathering ~181M cf/day under long-term, fee-based agreements, and SMLP, MWE and EMG expect to develop more than $3B of natural gas gathering and condensate stabilization infrastructure for its customers through the joint venture.
MarkWest Energy (MWE) commences its 120M cf/day Bluestone II cryogenic processing facility, which increases MWE's processing capacity for Marcellus producers operating in northwest Pennsylvania to 210M cf/day.
MWE also completes 20K bbl/day of ethane and heavier fractionation capacity at Bluestone, and a 32-mile purity ethane pipeline connecting to Mariner West.
Bluestone II primarily supports the expanding production of Rex Energy (REXX), which now has 190M cf/day of dedicated processing capacity at MWE’s Keystone facilities.
MWE also resumes operations at its Houston, Pa., processing and fractionation complex after shutting operations last week following an apparent lightning strike.
MarkWest Energy Partners (MWE -0.4%) says it is assessing the damage at a natural gas processing plant in Pennsylvania after an apparent lightning strike and is working with customers to reroute some of their gas to another location.
The Houston, Pa., complex consists of three processing plants totaling 355M cf/day of capacity and 98K bbl/day of ethane and other natural gas liquids.
Range Resources (RRC +1.7%) says some of its wells in the area are shut in while the plant is down but expects minimal impact to its Q2 production; RRC maintains Q2 production guidance of 1,065M-1,075M cfe/day.
Utilities that meet takeover criteria outlined by Warren Buffett this weekend for another “major” acquisition after paying more than $5B last year for electricity provider NV Energy include Wisconsin Energy (WEC +1.8%) and Alliant Energy (LNT +1.1%), Bloomberg speculates.
WEC and LNT operate in states with favorable regulatory environments, and LNT is expanding into renewable energy, which Buffett has signaled could be a focus for large investments, according to Morningstar; pipeline MLPs such as Plains All American (PAA) and MarkWest Energy (MWE) also could appeal to Buffett, a Baird analyst says.
Berkshire Hathaway (BRK.A, BRK.B) “is likely looking at a lot of small, regulated utilities that have a lot of growth on the table where his low cost of capital is an incredible advantage,” Morningstar's Mark Barnett says.
MarkWest Energy (MWE +0.6%) is downgraded to Neutral from Buy with a $65 target price, lowered from $72, at UBS, which cites MWE's substantial capex needs, meaning significant additional funding requirements.
The large volume ramp MWE needs to hit targets, while likely, is not a lay-up, the firm says, particularly given potential issues such as weather, ongoing commodity volatility and basis blowouts for producers; it will be difficult for MWE to hit high single digit/low double digit distribution growth until its capex bulge begins to wind down in late 2015.
Wunderlich also cuts shares to Hold from Buy, seeing investor concern about the return profile on the capex and the lead time required to achieving the stated mid-double-digit return on investment capital targets, which the firm sees limiting near-term valuation expansion (Briefing.com).
MarkWest Energy (MWE -4.1%) opens sharply lower after suffering a rash of analyst downgrades following weaker than expected Q4 results.
Wells Fargo downgrades MWE to Market Perform from Outperform with a $66-$70 target range, down from $70-$74, as it appears distribution growth will remain in the mid-single digits through most of 2015, primarily driven by a larger-than-expected $1.8B-$2.3B 2015 capex program vs. $1B expected.
MWE is cut to Sector Perform with a $72 price target at RBC, as it now sees 2014-15 distribution growth of 5% and 7%, respectively, vs. 7% and 12% prior, also citing higher 2015 capex lengthening its funding cycle expectation.
Morgan Stanley lowers shares to Equal Weight with a $72 target.
MarkWest Energy Partners L.P. is engaged in the gathering, processing and transportation of natural gas; the gathering, transportation, fractionation, storage and marketing of NGLs; and the gathering and transportation of crude oil.