What happened
The units of midstream limited partnership Crestwood Equity Partners LP (CEQP) rose a little over 13% in March according to data provided by S&P Global Market Intelligence. What's interesting here is that the partnership didn't release any news in the month, with the earnings release on Feb. 19 marking the last official news drop. But on March 6 the company presented at the Barclays Midstream Corporate Access Day. It was after that conference that the units started their climb.
So what
Although nothing material changed at Crestwood between its earnings release and the March presentation, the two events are very different animals. With regard to earnings, the partnership was simply going over the past. Yes, it provided updates about the future, but historical earnings were the big story. However, at the Barclays event, the sole goal was to highlight the outlook for the future and, basically, sell the story.
Image source: Getty Images.
And on that front, Crestwood clearly provided information that got investors excited. There were a number of big takeaways. For example, the partnership is expecting material production growth through 2021 in its key markets. Bakken production is projected to be up 55%, Powder River Basin/Niobrara production is expected to advance 100%, and the Permian Basin is targeted to see an 80% increase. All of these markets have break-even rates below $30 per barrel, as well, suggesting that they can grow even in the face of volatile energy prices. That, in turn, means that Crestwood is well positioned to keep growing its business over the next few years.
In 2019, meanwhile, Crestwood is looking for midteens EBITDA growth and robust distribution coverage of at least 1.4 times. That leaves it plenty of room for distribution increases, as well as spending on growth projects and paying down debt. All good news for investors. And management pointed out that, relative to peers, Crestwood looks cheap based on an enterprise-value-to-EBITDA basis. One more reason for investors to favor the partnership and its nearly 7% yield.
Now what
Crestwood's advance in March easily outdistanced some of the midstream industry's largest names. That said, if you look back over the trailing five years, the units have badly lagged. But if March is any indication, it appears that investors are becoming increasingly confident in the story that management is telling here.
