The outlook is favorable for the midstream space, as U.S. energy production is expected to continue to grow.
The U.S. Energy Information Administration estimates that production of oil, natural gas, and natural gas liquids (NGLs) will grow over the next two years, the agency said in its short-term energy outlook released March 11. This is a tailwind for midstream, as these companies are responsible for transporting oil and natural gas and ensuring it is in useful form, providing crucial infrastructure for the industry.
Crude oil production is expected to increase by 3.0% in 2025, and grow another 1.1% in 2026 (compared to 2025). Additionally, natural gas production is projected to grow by 1.9% in 2025 and by 2.4% in 2026, after holding steady in 2024. Finally, the strongest production growth is expected to come from NGLs, which is forecasted to grow by 2.2% in 2025 and 4.4% in 2026.
See more: NGLs: The Other Growth Driver for Midstream
Midstream is unique within energy for its fee-based businesses, which provide visibility to future cash flows. The segment provides services for fees under long-term contracts, resulting in stable and predictable cash flows. Furthermore, continued production growth benefits the space as it leads to more fee opportunities for midstream.
Add Exposure to Midstream Companies Benefiting From Growing U.S. Energy Production
The Alerian MLP ETF (AMLP ) and the Alerian Energy Infrastructure ETF (ENFR ) each deliver exposure to the midstream space.
AMLP offers exposure to the Alerian MLP Infrastructure Index (AMZI). The index is a composite of energy infrastructure MLPs that earn most of their cash flow from midstream activities.
Additionally, ENFR provides exposure to the Alerian Midstream Energy Select Index (AMEI). The index is a composite of North American midstream energy infrastructure companies, including C-corps as well as MLPs. Energy infrastructure companies are those engaged in the pipeline transportation, storage, and processing of energy commodities.
For more news, information, and analysis, visit the Energy Infrastructure Channel.
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