Stephens Inc. MLP Analyst Matt Schmid says one of his top picks this year is Markwest Energy Partners LP (MWE). He says the company has a best-in-class processing asset base in the Marcellus and Utica, serving top customers there like Range (NYSE:RRC), Antero (NYSE:AR), EQT (NYSE:EQT).
Schmid says the company has a bit of commodity sensitivity, and took its distribution guidance down a bit from 7% to 4.5% growth this year. But, he says Markwest is really growing its fee-based agreements.
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“I think approaching 90% of their cash flow is going to be fee-based this year on this updated guide,” Schmid says. “Really, the assets are leveraged to some of the lowest-cost gas production in the country in the Marcellus and Utica, so even if you stay in this subdued net gas environment, this is an area where you’re going to see continued volume growth.”
In spite of the rollover in commodity prices from November and Markwest taking down its distribution guidance a bit, Schmid says was encouraged by the company’s most recent earnings call because their guidance for Marcellus and Utica processing and fractionation growth stayed largely intact.
“So you’re really seeing no impact on the volume side, and they are becoming more and more levered to volumes versus price,” Schmid says. “I think long term they’re going to be a great grower and another core position.”
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