3 Under-the-Radar Midstream Companies
U.S. domestic oil and gas production is higher than it has been in decades, and as a result the midstream industry is booming as well. But headline hogs such as Kinder Morgan and TransCanada aren't doing all the work.
Across the country there are hundreds of unheralded midstream outfits that are contributing as well. These companies may be potential buyout targets, destined for incredible growth, or they may be about to go bust -- and they are worth a little research. With that in mind, today we begin to get to know three under-the-radar pipeline companies.
Copano Energy (Nasdaq: CPNO)
The Houston-based midstream company recently announced it is adding 400 million cubic feet of cryogenic processing capacity at its Houston Central complex. The upgrade will cost the company about $190 million, but it will bring total plant capacity to 1 billion cubic feet per day and allow Copano to take advantage of increased liquids production in the Eagle Ford shale.
While most midstream companies operate as master limited partnerships, Copano differentiates itself by operating as a limited liability company. There is still extra paperwork come tax time, but the important difference here is that unit holders don't share distributions with a general partner. The structure gives unit holders a meaningful vote and allows for greater distribution growth over time.
DCP Midstream Partners (NYSE: DPM)
DCP is the 50-50 joint venture between SpectraEnergy (NYSE: SE) and ConocoPhillips (NYSE: COP) . The JV has been active lately, acquiring a 10% ownership interest in Enterprise Products Partners' Texas Express Pipeline and signing an agreement with that company and Anadarko Petroleum to develop and construct the Front Range NGL pipeline connecting Colorado's Denver-Julesburg Basin to Carson County, Texas.
Both projects bring much-needed natural-gas liquids capacity to the market at a time when producers are focusing more and more on producing NGLs instead of dry gas. The Front Range pipeline will have capacity of 230,000 barrels per day and is expected to come online in the fourth quarter of 2013. The Texas Express pipeline has long-term shipper commitments of 232,000 to 252,000 barrels per day, including 20,000 BPD from DCP's own NGL affiliate. That project is expected to come online in the second quarter of next year.
Boardwalk Pipeline Partners (NYSE: BWP)
Liquids are pushing Boardwalk's growth as well. In February the company announced it had secured commitments from Statoil and Talisman Energy for its new project in the booming Eagle Ford shale. Boardwalk plans to increase its gathering system and build a cryogenic gas-processing plant. The projects will cost a total of $180 million and are expected to come online during the first quarter of next year.
In the meantime, Boardwalk is chugging right along, increasing first-quarter revenue year over year and outperforming analyst estimates on earnings per share.
These three stocks don't capture the headlines the way other midstream companies do, but they could be a valuable addition to your portfolio. Using Internet tools like My Watchlist can help you stay informed and figure out which one is best for you.