US midstream activity heats up

The US midstream sector has been one of the hottest infrastructure investment destinations in 2017. A long list of fund managers have put billions of dollars of capital to work in pipelines, storage terminals and gathering systems.

A few years ago, this would not have been the case. In 2014 global oil prices came crashing down in the second half of the year, with a barrel of West Texas Intermediate losing half its value by July 2015. Prices bottomed out by January 2016, falling from $109 to $29 per barrel in around a year and a half.

Since then, oil prices have risen and stabilised at the $45 to $55 per barrel range. Not as lucrative as before the crash, but steady prices and new drilling technology have enticed upstream players to return.

With a rush of oil flowing, primarily from fields in and around West Texas, assets are needed to transport and store the commodity. A growing number of investors have responded, leading to some chunky midstream deals this year.

Investors with their strategy entirely focused on the energy sector were quite active, including NuStar Energy’s $1.47 billion acquisition of oil transport company Navigator Energy and EIG Global Energy Partners’ $500 million investment in a 200-mile pipeline.

Managers with a more general strategy committed to the sector in a big way as well, with Blackstone Energy Partners’ $2 billion acquisition of EagleClaw Midstream Ventures and Global Infrastructure Partners’ $1.82 billion purchase of Medallion Gathering and Processing emerging as standout deals.

If the deal pipeline continues to be this rich, 2017 might end up being a stellar year for the perennially popular US midstream sector.