MLPs and midstream companies largely reported strong earnings for the first quarter of 2022, with results from several companies exceeding consensus expectations.
Many companies raised their financial guidance for 2022 or indicated they see results trending above their forecasts due to the stronger macro environment. According to Stacey Morris, CFA, director of research at Alerian, the positive trends in returns to shareholders continued with dividend increases and buybacks, and progress was made on pipeline solutions for transporting natural gas from the Permian.
While midstream overall had a strong quarter, certain subsectors saw more strength than others. “Liquefaction name Cheniere Energy (LNG) knocked the cover off the ball as adjusted EBITDA for the quarter was more than $1 billion — or approximately 65% — above analysts’ expectations,” Morris writes. “Cheniere raised 2022 EBITDA guidance by $1.2 billion or 17% at the midpoint to $8.45 billion citing increased production of LNG and continued strength in global markets.”
Morris says the large, diversified names in the space, which tend to have exposure to natural gas transportation and/or gathering and processing, announced results above expectations.
“Energy Transfer (ET) and Williams (WMB) both beat analysts’ expectations for the quarter and raised 2022 guidance,” Morris says. “Kinder Morgan (KMI) also announced numbers ahead of consensus, and management expects 2022 financial performance to be favorable relative to the guidance provided. The results from Enterprise Products Partners (EPD) also exceeded analyst estimates, with the company highlighting its petrochemical and refined products business, as well as gas processing margins and the acquisition of Navitas Midstream, which closed on February 17.”
Companies primarily focused on gathering and processing tend to be more sensitive to commodity prices and largely had strong results and positive outlooks.
Morris said EnLink Midstream (ENLC) and DCP Midstream (DCP) were among those that beat expectations, with ENLC raising guidance and DCP noting that the current forward curve implies more than $200 million or ~14% in upside to the midpoint of their 2022 financial guidance.
“For companies with exposure to the Bakken or Rockies, extreme weather in 1Q22 and April has had some impact on producers with implications for midstream volumes. Crestwood Equity Partners (CEQP), Hess Midstream (HESM), and ONEOK (OKE) reaffirmed full-year EBITDA guidance despite the weather-related challenges,” Morris writes.
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