Pipelines and Energy
Business & Investment Report
Prepared: January 20, 2025
Disclaimer: The following report is for informational purposes only and does not constitute financial or investment advice. Always conduct your own due diligence or consult a licensed professional before making investment decisions.
Executive Summary
With President Trump returning to the White House and signaling a renewed focus on traditional energy development—summarized by the slogan “Drill, Baby, Drill”—the U.S. midstream (pipeline) sector stands poised for a potential uptick in natural gas and oil throughput. Easing of permitting processes, expedited infrastructure approvals, and expanded access to federal lands are likely catalysts.
Top Five Pipeline Companies to Watch:
- Kinder Morgan (NYSE: KMI)
- Williams Companies (NYSE: WMB)
- Energy Transfer LP (NYSE: ET)
- Enterprise Products Partners (NYSE: EPD)
- ONEOK (NYSE: OKE)
All five have extensive U.S. natural gas infrastructure, strong financial fundamentals, and direct exposure to regions poised for production growth under the current administration’s energy strategy.
Market Context
Policy Tailwinds:
- A pro-drilling administration typically reduces regulatory hurdles, possibly accelerating new pipeline projects or expansions.
- Producers in prolific basins (Permian, Marcellus/Utica, Haynesville, Bakken) could increase output, driving higher demand for pipeline capacity.
Natural Gas Dynamics:
- Rising global Liquefied Natural Gas (LNG) demand (especially in Europe and Asia) supports exports, which boosts midstream volumes.
- An administration focused on energy independence is likely to encourage increased infrastructure build-out to move resources from wellhead to domestic and international markets.
Challenges & Risks:
- Local and state opposition can still slow or halt pipeline projects despite federal support.
- Commodity price volatility may affect producers’ capital spending decisions, influencing pipeline volumes.
- Global economic or geopolitical events could shift demand patterns, affecting throughput.
1. Kinder Morgan (NYSE: KMI)
Company Snapshot
- Market Cap (Approx.): $45–50 billion
- Dividend Yield (Approx.): Historically in the 6% range
- Core Operations: 70,000+ miles of natural gas pipelines, plus terminals and storage facilities.
Investment Thesis
- Massive Infrastructure Footprint: Kinder Morgan moves ~40% of U.S. natural gas, making it exceptionally leveraged to any production surge.
- Expansion Projects: Several ongoing or planned capacity expansions (e.g., in the Permian Basin, where associated gas production continues to rise). Under an administration that eases permitting, these could move forward more quickly.
- Stable Cash Flows: The company relies heavily on fee-based contracts, offering insulation from commodity price volatility.
Outlook
- Near-Term: Growth could come from incremental expansions and higher throughput in core regions (Permian, Haynesville).
- Long-Term: Kinder Morgan’s wide moat in natural gas pipelines positions it well to capitalize on sustained LNG export growth.
2. Williams Companies (NYSE: WMB)
Company Snapshot
- Market Cap (Approx.): $35–40 billion
- Dividend Yield (Approx.): Around 5–6%
- Core Operations: Operates the Transco pipeline (spanning Texas to New York), plus major assets in the Marcellus/Utica.
Investment Thesis
- Strategic Marcellus Focus: Appalachia is the largest U.S. gas-producing region; increased drilling here directly impacts Williams’ throughput.
- Transco Pipeline Dominance: Critical infrastructure delivering gas to high-demand corridors on the East Coast; expansions regularly go online to meet regional and export needs.
- Stable, Regulated Cash Flows: Similar to Kinder Morgan, Williams benefits from fee-based or regulated rate structures.
Outlook
- Near-Term: Projects aimed at debottlenecking Appalachian supply could accelerate if permitting for expansions becomes more streamlined.
- Long-Term: Steady demand from high-density markets along Transco’s route, plus rising LNG exports via Gulf Coast terminals, supports robust throughput.
3. Energy Transfer LP (NYSE: ET)
Company Snapshot
- Market Cap (Approx.): $40–45 billion
- Distribution Yield (Approx.): 8–10%, often higher than peers
- Core Operations: Vast network of natural gas, natural gas liquids (NGLs), and crude oil pipelines, spanning multiple basins.
Investment Thesis
- Integrated System: Energy Transfer connects production basins (Permian, Marcellus, Utica, Bakken) to end markets, including significant processing and fractionation capacity.
- Growth-Oriented Management: Known for acquisitions (e.g., merging with Enable Midstream) and aggressive pipeline expansions. A friendlier federal stance on energy could support further growth.
- Attractive Yield: Distributions are typically higher than industry averages; potential volume growth could sustain or even increase payouts.
Outlook
- Near-Term: Ramping production in Permian and Haynesville could fill ET’s underutilized capacity and boost earnings.
- Long-Term: Additional NGL and crude expansions, plus possible synergy in new Gulf Coast export facilities, may drive continued growth.
4. Enterprise Products Partners (NYSE: EPD)
Company Snapshot
- Market Cap (Approx.): $55–60 billion
- Distribution Yield (Approx.): 7–8%
- Core Operations: Over 50,000 miles of pipelines, large NGL processing and fractionation footprint, plus export terminals.
Investment Thesis
- NGL Leader: Enterprise is a major mover of natural gas liquids, which often see increased production when natural gas and crude drilling climbs.
- Stable, Long-Term Contracts: A large portion of EPD’s revenue is secured through long-term agreements; less commodity price risk.
- Export Potential: Gulf Coast terminals (e.g., on the Houston Ship Channel) could see higher volumes if LNG and NGL exports expand.
Outlook
- Near-Term: Increases in associated gas and NGL output from the Permian may flow through EPD’s gathering and fractionation networks.
- Long-Term: Strong balance sheet and conservative financial management allow for steady expansions and reliable distributions.
5. ONEOK (NYSE: OKE)
Company Snapshot
- Market Cap (Approx.): $25–30 billion
- Dividend Yield (Approx.): 5–6%
- Core Operations: Gathering, processing, and transportation of natural gas and NGLs primarily in the Mid-Continent and Williston Basin.
Investment Thesis
- Strategic Basin Exposure: Positioned in the Bakken (Williston) and Mid-Continent (Oklahoma, Kansas) where natural gas and NGL production can surge under favorable drilling economics.
- Recent Expansion Moves: ONEOK’s acquisition of Magellan Midstream in 2023 broadened its asset base, diversifying the company’s commodity mix and expanding pipeline mileage.
- Fee-Based Revenue Model: A heavy reliance on fee-based contracts protects against commodity price downturns.
Outlook
- Near-Term: Heightened drilling in the Bakken could lift gas and NGL volumes for ONEOK’s gathering and processing systems.
- Long-Term: Integration of assets from the Magellan acquisition could improve economies of scale and support stable cash flows.
Risk Factors & Considerations
- Permitting & Legal Challenges: Even with federal support, local and environmental litigation can delay major pipelines.
- Commodity Price Swings: Sharp declines in oil or natural gas prices can slow upstream drilling, lowering volumes.
- Interest Rate Environment: Higher rates raise the cost of capital for new infrastructure projects and can pressure distributions for high-yield MLPs.
- Global Economic Shifts: If global LNG or oil demand softens, export-driven volume growth could underperform expectations.
Conclusion & Investment Implications
Under President Trump’s renewed emphasis on fossil fuel production, these five pipeline companies—Kinder Morgan, Williams, Energy Transfer, Enterprise Products Partners, and ONEOK—are well-positioned to capture incremental volume growth and capitalize on expedited infrastructure approvals. While each faces unique market and regulatory risks, their strategic asset footprints, stable fee-based contracts, and potential for heightened utilization present a favorable outlook for midstream investors over the next few years.
Final Note: Prospective investors should monitor evolving policy initiatives, global energy market trends, and company-specific updates (balance sheet strength, capital expenditure plans, distribution strategies) to make well-informed decisions.
ED Note:
With a heavy focus by the incoming administration on speeding up the advancement of Ai Tech, the energy sector benefits, especially those companies that will carry that energy to it's destinations!
We curenty have no positions in the companies mentioned however we are placing them on our watch list for now!
This report is provided for general information only and does not constitute a recommendation to buy or sell securities. Always conduct independent research or consult a financial advisor for personalized guidance.
