Goldman Sachs Is Making Waves In The Pipeline Space

Goldman Sachs released a new report this week with their updated outlook for oil prices, pipeline stocks and MPLs. Despite lowering their expectations for oil prices, Goldman analysts upgraded two names in the space.
Oil & gas forecast
Goldman’s energy analysts lowered their forecasts for WTI prices in 2016 from $65 to $57/bbl and their forecast for 2017 prices from $65 to $60/bbl. As far as the remainder of 2015 goes, analysts kept their $51/bbl WTI projection in place.
On the natural gas side, analysts lowered their projected prices for 2015, 2016 and 2017 to $2.85, $3.50 and $3.25/MMBtu, respectively.
Robust midstream fundamentals
While analysts see weakness in oil and gas prices, they believe that midstream names will demonstrate strength based on a combination of efficiency gains and cost deflation.
“We maintain our position that midstream fundamentals will remain robust supporting fee-based cash flow growth driven by: (1) strong crude oil/NGL supply growth, (2) a natural gas “supply push” from the Marcellus/Utica and “demand pull” from power, industrial and LNG, and (3) NGL demand driven by domestic petrochemical new-builds and exports,” analysts explain.
Growth opportunities
For MLPs, Goldman is forecasting 17 percent overall returns over the next 12 months based on 5.7 percent yield and 9.0 percent distribution growth. For C-Corps, Goldman sees a 16 percent compound annual dividend growth rate over the next three years.
Although analysts see plenty of opportunity out there, they are cautious on commodity-sensitive names.
Stock picks
In the report, Goldman upgraded Cheniere Energy Partners LP CQP and Holly Energy Partners LP HEP from Neutral to Buy. In addition, Goldman downgraded Targa Resources Partners LP NGLS from Buy to Sell and Cheniere Energy Inc LNG from Buy to Neutral.