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Top Midstream Companies Based on the Correlation with Crude Oil

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Part 8
Top Midstream Companies Based on the Correlation with Crude Oil PART 8 OF 8

Crestwood Equity Partners’ Correlation with Crude Oil

Crestwood Equity Partners versus crude oil

Crestwood Equity Partners (CEQP) is the midstream MLP involved in natural gas gathering and processing, natural gas transportation, crude oil gathering, and crude oil and NGLs (natural gas liquids) logistics. Crestwood Equity Partners is seventh among midstream companies in terms of its correlation with crude oil. Crestwood Equity Partners’ one-year correlation with crude oil was 0.41 as of February 6, 2018.

Crestwood Equity Partners&#8217; Correlation with Crude Oil

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Crestwood Equity Partners’ high correlation with crude oil could be attributed to its natural gas processing and crude oil logistics business. However, the partnership is protected from commodity price volatility to a large extent from fee-based contracts. According to a recent investor presentation, ~85% of Crestwood Equity Partners’ 2017 EBITDA is expected to come from take-or-pay and fixed-fee contracts.

Analysts’ recommendations

Of the analysts surveyed by Reuters, 66.7% rated Crestwood Equity Partners as a “buy,” while 33.3% rated it as a “hold” as of February 8, 2018. Crestwood Equity Partners has seen three rating upgrades in 2018 including:

  • Capital One Financial – “equal weight” to “overweight”
  • Barclays – “underweight” to “equal weight”
  • Wells Fargo – “market perform” to “outperform”

Crestwood Equity Partners is trading below the low range ($28) of analysts’ target price. The partnership’s average target price of $29.8 implies ~13% upside potential from the current price levels.

For more coverage on midstream companies, visit Market Realist’s Master Limited Partnerships page.

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