A caller on the Aug. 2 broadcast of CNBC’s “Mad Money” asked Jim Cramer what he thought of Energy Transfer LP.

“I don’t like the MLPs,” Cramer said. “I say take some profits and sell it.”

Well, somebody must like ET—its stock price is up 51% year to date. A day after the show broadcast, the pipeline giant with $25 billion market capitalization announced healthy second-quarter earnings.

ET is not alone. The midstream sector enjoyed a strong second quarter and positive outlooks are numerous, reported Alerian, which likes MLPs.

“As midstream earnings season comes to a close, solid results across the board—characterized by robust free cash flow generation, disciplined capital spending and a continued focus on financial flexibility—add confidence to the reliability of midstream income,” Alerian’s Mauricio Samaniego wrote in an Aug. 10 report. “The outlook remains steady and largely constructive in the short-term, with some midstream management teams citing expectations for the energy environment to strengthen further in 2H21 and into 2022.”

The longer-term outlook is shaping up favorably, Samaniego continued, as more midstream companies incorporate clean-energy strategies or move forward on existing energy transition investments.

Selected Results

Energy Transfer LP (ET): Higher earnings in the midstream, intrastate and NGL and refined products segments helped ET achieve $625 million in distributed cash flow (DCF) in the second quarter, easily beating the $353 million reported in second-quarter 2020.

To be sure, ET’s stock has faltered almost 19% since mid-June but the company expects a promising second half of the year for its NGL export business. Energy Transfer’s Orbit Gulf Coast NGL Exports LLC joint venture with Satellite Petrochemical USA Corp. loaded its first Very Large Ethane Carrier in January, bound for China.

Second-quarter volumes of NGL on the Mariner East pipeline were up 15%, and the final phase of Mariner East construction is expected to be complete in the fourth quarter.

Enbridge Inc. (ENB): North America’s largest pipeline company experienced a strong second quarter with earnings of about C$1.4 billion (US$1.12 billion) and adjusted earnings of C$0.55 per share, beating analyst estimates. The gas distribution and storage segment, in particular, saw earnings rise 13.5% in the quarter compared to second-quarter 2020. ENB’s stock price is up 24% year to date.

In the earnings release, President and CEO Al Monaco noted how management is positioning Enbridge for the energy transition.

“We believe that in all practical scenarios, our assets will remain critical to supporting long term energy demand,” Monaco said. “Existing infrastructure is going to play a key role in the transportation and storage of future energy supplies, ensuring affordable and reliable access to conventional and low-carbon energy.”

Enterprise Products Partners LP (EPD): Net income rose to $1.1 billion in second-quarter 2021, compared to $1 billion for the same period in 2020. DCF was $1.6 billion for both periods. Investors have rewarded EPD by pumping up its stock price by about 18% year to date.

Enterprise’s distribution for the quarter was $0.45 per common unit, a 1.1% increase over second-quarter 2020. The payout ratio—cash distributions and buybacks as a percentage of cash flow from operations—was 60%, which is among the highest in a group of non-peer midstream C-corps and MLPs, co-CEO Randy Fowler said.

He added that Enterprise planned a unit buyback in the second half of 2021 similar to its $200 million buyback in 2020.

Co-CEO Jim Teague expressed EPD’s optimistic approach.

“We’re pleased with how our assets and our people performed again last quarter,” he said. “We have been outspoken about why we have been bullish on prices for well over a year, and have been preparing accordingly. The global inventory excesses that came with the global pandemic for the most part been exhausted. And it’s nice to see both supply and demand participating in what we believe will be a very strong extended recovery cycle.”

Kinder Morgan Inc. (KMI): A $1.6 billion hit on KMI’s South Texas gathering and processing assets led to a $757 million net loss for the quarter, but Kinder still declared a dividend of $0.27 per share. The stock price is up 27% since the start of 2021.

During the quarter, KMI spent $310 million to purchase Kinetrex Energy, a producer of renewable natural gas and supplier of LNG in the Midwest. The company also bought Stagecoach Gas Services LLC for $1.23 billion. The Stagecoach deal provides KMI with four gas storage facilities, assets deemed even more valuable following the February storm.

Natural gas volumes rose 4% in the quarter compared to the same period in 2020. Higher volumes on the Permian Highway and Tennessee Gas pipelines to LNG customers and Mexican markets were somewhat offset by lower volumes moving from the Rockies on the Colorado Interstate Gas Pipeline.

TC Energy Corp. (TRP): The Canadian pipeline giant saw its second quarter net income hit C$1 billion, or $1.07 per common share; EBITDA was $2.2 billion. The company declared a dividend of $0.87 per share. Since the beginning of the year, the stock price has increased by 18.5%.

In the quarter, TRP announced a partnership with Pembina Pipeline Corp. to develop a carbon transportation and sequestration system in Alberta. The Alberta Carbon Grid CCUS system will have a capacity of more than 20 mtpa and connect the Fort McMurray region, the Alberta Industrial Heartland and the Drayton Valley region to key sequestration locations and delivery points across the province, serving multiple industries.

The Williams Cos. Inc: (WMB): Second-quarter net income reached $304 million or $0.25 per diluted share (EPS), with adjusted EBITDA of $1.317 billion, a 6% increase over the same period in 2020. Simply Wall Street said EPS came up shy of analysts’ expectations, but the stock price of about $25 is 24% above where it was at the start of the year. Analysts’ consensus price target is $29, though one analyst set it at $32.

Williams set a record in its quarterly gas gathering volumes of 13.79 Bcf/d. EBITDA from gathering operations in the West totaled $231 million, while the Northeast figure was $409 million. Both figures beat Zack’s Equity Research expectations.

Williams executives acknowledged the value of those assets in the Marcellus-Utica during its earnings call with analysts.

“At a very high-level summary, the quarter benefited from nice increases in profitability from our Northeast gathering systems, an uplift in revenues on our Transco pipeline from new projects that have been put into service over the last year and contributions from our upstream operations in the Wamsutter (Wyo.),” CFO John Chandler said.

Chandler added that volume growth in the Northeast was predominantly supplied by JVs in the Bradford Supply Hub, in which the gathering system expanded in late 2019; and at Williams’ Marcellus South supply basin, where wells were more productive.

MPLX LP (MPLX): Pipeline volumes returned to pre-pandemic levels, MPLX reported, and EBITDA increased 12% to $1.4 billion in the quarter over second-quarter 2020. DCF was $1.3 billion. The company’s stock posted a 28% gain from the beginning of the year.

The Whistler natural gas pipeline in the Permian Basin, in which MPLX has a 38% ownership, began service in the second quarter and is expected to continue to ramp up throughout 2022, retiring CFO Pamela Beall said during the earnings call. The Wink-to-Webster crude oil pipeline is expected to be completely in service by the end of the year. MPLX has a 15% ownership interest in that line.

Beall noted that the company would consider any opportunity to sell all or part of underperforming assets.

“We will continue to evaluate opportunities to sell or joint venture such operations where there’s a value creation opportunity,” she said. “And while macro trends have improved for gathering and processing, valuations for assets in non-core basins really have not been compelling.”

Plains All American Pipeline LP (PAA): Quarterly EBITDA of $579 million beat analyst expectations of around $490 million, and strength in PAA’s transportation segment has prompted guidance of an upward 2% tick in EBITDA for 2021. The stock price is up 20% for the year.

PAA sold its Pine Prairie and Southern Pines natural gas storage centers on the Gulf Coast to Hartree Partners for $850 million, closing the sale in August. The company also announced in July that it would merge its Permian Basin assets with Oryx Midstream.

Cheniere Energy Inc. (LNG): The LNG company took a $329 million loss in the second quarter, which management attributed to accounting treatments of integrated production marketing (IPM) agreements. The agreements in question were mostly long-term contracts, and no cargo cancellations were involved. In an IPM, a concept pioneered by Cheniere, the company buys natural gas from a producer at a price equal to a global natural gas or LNG index, such as the Japan Korea Marker, minus liquefaction, shipping and other costs.

“As we have discussed in prior quarters, our IPM agreements, certain gas supply agreements and certain forward sales of LNG qualify as derivatives and require mark-to-market accounting, meaning that from period to period, we will experience gains and losses as movements occur in the underlying forward commodity curves,” CFO Zach Davis said during an earnings call with analysts.

Cheniere management were optimistic about the company’s outlook, noting that long-term LNG contracts were returning and would support continued liquefaction construction. The company has reduced its debt by more than $500 million so far this year. Cheniere’s stock price is up 47% since the start of the year.

ONEOK Inc. (OKE): Second-quarter earnings of $342 million far exceeded the $134 million reported in the same period in 2020. EPS of $0.77 beat analyst estimates of $0.75. The company’s stock price is up 41% for the year.

ONEOK is taking a conservative approach to projects going forward.

“It’s really going to be routine growth and some smaller growth projects that are very attractive going forward,” CFO Walt Hulse said in response to an analyst’s question on the quarterly earnings call. “So, we’ll have plenty of free cash flow to continue to deleverage and then look at all of those capital allocation opportunities over the next couple of years.”

Targa Resources Corp. (TRGP): Targa generated $460 million in EBITDA in the quarter, 31% higher than the same period in 2020, beating the analyst consensus of $443 million. The company expects full-year EBITDA for 2021 to be in the range of $2 billion. Its stock price is up 54% for the year.

Piper Sandler noted that Targa completed its Heim gas processing plant in the Permian six months early and is moving forward with the 250-MMcf/d Legacy plant to take advantage of the need for additional gas processing in the play. Legacy’s target for completion is fourth-quarter 2022. 

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