Midstream 2020 EBITDA Guidance Updates Highlight Stability

05/08/20 | Bryce Bingham

Moving into the late stages of 1Q20 earnings season for midstream, financial guidance updates have varied, but the overall outlook for midstream has been much better than other energy sectors, which have seen analysts’ forward EBITDA estimates for 2020 and 2021 nearly halved (read more). Midstream 2020 guidance revisions have not been nearly as severe as one might suspect based on equity price performance and the ~70% decline in oil prices year-to-date through April 30. While some companies have announced double-digit percentage revisions to prior guidance, others have reaffirmed numbers provided before oil’s collapse and the subsequent change in the outlook for US production (read more). The table below compiles full-year 2020 EBITDA guidance revisions across midstream from recent earnings reports. Aggregating the EBITDA guidance updates provided through yesterday, 2020 EBITDA guidance has seen an average downward revision of just under 8% for the companies listed. Four names have maintained prior EBITDA guidance with earnings results – Cheniere Energy (LNG), Genesis Energy (GEL), Pembina (PPL), and  Williams (WMB). PPL and WMB maintained their prior guidance ranges but noted that actual results could come in on the lower end of the range. WMB also continues to forecast free cash flow after its dividend in 2020 and kept its 1Q20 payout flat sequentially. While it maintained its initial guidance range, GEL noted that it expects to finish at the bottom of that range, if not below it. Energy Transfer (ET), which reports 1Q results on Monday, also reiterated its initial guidance and expectations to be free cash flow positive after its distribution in 2021 in a March 17 presentation. At the other end of the spectrum, the most severe 2020 EBITDA revision was from Rattler Midstream (RTLR), which recently reaffirmed a March guidance update that represented a 25.3% reduction from initial 2020 EBITDA guidance.

In light of the unknowns surrounding COVID-19, DCP Midstream (DCP) and ONEOK (OKE) withdrew their traditional EBITDA guidance. OKE instead provided an EBITDA scenario analysis of $2.6 billion to $3 billion, the midpoint of which represents a 13.2% downward revision from its prior guidance. DCP updated guidance for select metrics but excluded EBITDA. A few companies have offered other 2020 guidance measures in lieu of EBITDA forecasts. In conjunction with deferring $1 billion of growth capex, Enbridge (ENB) maintained its distributable cash flow (DCF) per share guidance of $4.65. Magellan Midstream Partners (MMP) adjusted its full year DCF guidance to $1.04 billion at the midpoint, a 15.7% reduction from initial guidance. MMP also stated that it intends to maintain its distribution throughout 2020. In addition to WMB and ET, MLPs Crestwood Equity Partners (CEQP) and MPLX (MPLX) reiterated expectations to generate positive free cash flow after their dividends in 2020 and 2021, respectively.  While reduced capital spending (detailed here) lowers the hurdle for generating excess cash flow, maintaining free cash flow guidance with steady dividend payouts should still be welcomed by investors. CEQP, ET, MPLX, and WMB all maintained their dividends sequentially in 1Q20.

Overall, these guidance updates continue to underscore the benefits of midstream’s fee-based business model and resilience in a pressured environment, particularly when compared to other sectors of energy.

Links to Company Earnings Reports:
Antero Midstream (AM)
Cheniere Energy (LNG)
CNX Midstream (CNXM)
Crestwood Equity Partners (CEQP)
DCP Midstream (DCP)
Enable Midstream (ENBL)
Enbridge (ENB)
EnLink Midstream (ENLC)
Genesis Energy (GEL)
Hess Midstream (HESM)
Kinder Morgan (KMI)
Magellan Midstream Partners (MMP)
MPLX (MPLX)
NuStar Energy (NS)
ONEOK (OKE)
Plains All American (PAA)
Pembina Pipeline (PBA/PPL CN)
Rattler Midstream (RTLR)
Targa Resources (TRGP)
Western Midstream (WES)
Williams (WMB)