TJ Schultz is a Managing Director at RBC Capital Markets. Mr. Schultz joined RBC Capital Markets in 2008 and brings over 15 years of equity research and management consulting experience to the master limited partnership team, primarily focused on midstream energy partnerships. He was an Institutional Investor “Best Up and Comer” in 2012 and 2013 and appeared on the Institutional Investor All-America Research Team in 2017.
The Midstream Energy expert sees some top picks in the current environment. “…We think flows likely first gravitate to stocks that have already taken the self-help measures. This would include midstream entities that want to self-fund growth capital for the next several years and have attractive organic projects. A name that we like that checks those boxes would be MPLX (NYSE:MPLX), the MLP sponsored by Marathon (NYSE:MPC). It recently got rid of the IDRs and laid out a path to self-fund growth capital for the next several years. We think the MLPX footprint should allow for attractive projects to drive both distributable cash flow per unit growth and distribution growth through 2018 and 2019.”
Another top pick from Institutional Investor All-American TJ Schultz is Williams: “…We continue to see a need for natural gas infrastructure investment out of the Northeast, and we expect several large-scale natural gas takeaway projects to go into service over the next couple of years. This benefits stocks such as Williams Companies, Inc.(NYSE:WMB), which is executing on several Transco-related pipeline expansions.”
TJ Schultz is positive about the sector’s prospects. “Going forward, the space looks like a much safer and more investable asset class. You are seeing more interest by midstream entities to gravitate to a self-funding model. There is likely to be less focus on dividend and distribution growth and more focus on improving coverage of dividends to allow more internal funding of projects. It will not happen overnight, and if the equity markets are cooperative, there still should be financing opportunities available in the public markets for good projects. As long as this coincides with an improving fundamental backdrop and better fund flows into the space, we think the return profiles on projects can lead to better cash flow per unit and ultimately some valuation improvement through 2018.”
To get more Midstream Energy picks from this Institutional Investor All-American, read the entire interview in the Wall Street Transcript.