The Top 5 Midstream Companies

I'm a firm believer in the efficacy of lists. At worst, they're thought-provoking and help me stay organized. At best, someone else makes them for me. Today's list comes from energy consultancy PFC Energy. I'm using the company's list of the top 15 midstream companies to begin to evaluate this energy subsector's dominant players.

The top 5
PFC organizes its list by market cap, and it's a great way to take a snapshot of the biggest players in the industry. Let's take a quick look at last year's growth and this year's progress:

Company

Market Cap

2011 Share Price
Change Year-Over-Year

Share Price
Change Year-to-Date

Enterprise Products Partners (NYSE: EPD  ) $47.1 billion 11% 14%
Kinder Morgan (NYSE: KMI  ) $36.7 billion 21% 9%
TransCanada (NYSE: TRP  ) $31.9 billion 15% 4%
Enbridge (NYSE: ENB  ) $31.2 billion 32% 5%
Williams Cos. (NYSE: WMB  ) $20.0 billion 29% 19%

Sources: PFC Energy, Yahoo! Finance, Y! Charts.

Right off the bat, you can see the appeal of midstream investments. Enterprise, Kinder Morgan and Williams are all posting excellent returns this year. While KMI and WMB aren't doing as well as they did last year, they do offer one advantage over the more consistent Enterprise, which is that they are not structured as master limited partnerships and do not require extra paperwork come tax time. Returning 19% this year, this fact makes Williams look particularly appealing, so let's take a closer look at the company.

Getting to know you
Williams Companies holds the general partner stake in Williams Partners, a midstream MLP that covers all the standard bases for the industry: oil and gas pipelines, gas gathering, processing, and natural gas liquids fractionation. The company holds a stake in three pipelines that combine to deliver 14% of all natural gas consumed in the United States.

Williams had a rough second quarter, getting stung a bit by a decline in natural gas liquids prices. However, the company benefited as WPZ's fee-based business grew 19%, and that bodes extremely well for the future. Fee-based income mitigates the volatility of commodity prices, and is always something to pay attention to with our midstream investments.

Despite a disappointing second quarter, Williams remains confident in its future outlook and is committed to dividend growth. The company is on track to grow its payout 55% this year, and plans to increase it by 20% in 2013, and again in 2014.

Foolish takeaway
Lists are everywhere these days, and when they come from reputable sources like trade magazines and industry journals, they often provide a great beginning for investment research. Keep tabs on the best of the biggest -- click here to add the companies above to My Watchlist.

Fool contributor Aimee Duffy holds no position in any company mentioned. Click here to see her holdings and a short bio. If you have the energy, check out what she's keeping an eye on by following her on Twitter, where she goes by @TMFDuffy.

Motley Fool newsletter services have recommended buying shares of Kinder Morgan and Enterprise Products Partners. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days


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