Following Monday’s announcement that MarkWest Energy Partners (MWE) is being purchased by MPLX (MPLX), other midstream MLPs rallied.
SunTrust Robinson Humphrey analyst Tristan Richardson writes in his afternoon report on the deal:
We see the transaction as a validation of the long term demand for US NGL infrastructure. As the NGL barrel has declined, G&P firms and firms with exposure to liquids have seen valuations compress. Pro forma MPLX will be a significant handler of NGLs in the US and we think speaks to long term potential for midstream development around NGLs, despite current depressed prices.
Several Northeast players gained on the deal announcement, including Genesis Energy (GEL), up 4%, DCP Midstream Partners (DPM), up 3% and Targa Resources Partners (NGLS), up 2.5%.
Richardson believes the deal is particularly bullish for Enterprise Products Partners (EPD), which didn’t benefit on Monday. He writes:
EPD has pulled back amid concerns of NGL prices and the ability to grow in a difficult environment. The proposed deal speaks to the long term potential for the NGL market and the buildout of NGL infrastructure to new sources of market demand including NE export, Gulf export, Midwest refining and Canada, where EPD remains a leader with significant organic growth opportunities.
Richardson has a Buy rating on EPD and listed it among his favorite midstream MLP stocks in a mid-June report.