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Top Midstream Companies Based on the Correlation with Crude Oil

PART:
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Part 4
Top Midstream Companies Based on the Correlation with Crude Oil PART 4 OF 8

Williams Companies: Third-Highest Correlation with Crude Oil

Williams Companies versus crude oil

In the previous part, we discussed the correlation between ONEOK (OKE) and crude oil. In this part, we’ll analyze the correlation between Williams Companies (WMB) and crude oil. 

Williams Companies: Third-Highest Correlation with Crude Oil

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Williams Companies, the C corporation general partner of Williams Partners (WPZ), has the third-highest correlation among midstream companies. The one-year correlation coefficient between crude oil and Williams Companies was 0.48 as of February 6, 2018. At the same time, the correlation between crude oil and Williams Partners was 0.36.

Williams Companies’ correlation with crude oil is expected to come down in the coming quarter considering its reduced commodity price exposure following the sale of its commodity-linked businesses. Williams Companies is focused on a fee-based natural gas strategy. Williams Partners, which owns the majority assets, expects ~97% of the gross margin in 2017 to be from fee-based sources.

Williams Companies’ high correlation compared to Williams Partners could be attributed to its higher market liquidity and dependence on the limited partnership for distribution income.

Analysts’ recommendations

For Williams Companies, 71.4% of the analysts rated it as a “buy,” while 28.6% of the analysts rated it as a “hold” as of February 6, 2018. At the same time, Williams Partners had a “buy” rating from 80% of the analysts, while 20% rated it as a “hold.” Williams Companies and Williams Partners’ average target price of $35.7 and $46.3 implies ~25% and ~20% upside potential from the current price levels.

Next, we’ll discuss the correlation between Hi-Crush Partners (HCLP) and crude oil.

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