Master limited partnership ("MLP"), CONE Midstream Partners LPCNNX recently announced a 3.6% increase in its quarterly cash distribution. The revised dividend of 27.24 cents per unit will be distributed on Feb 14, 2017 to unitholders of record as of Feb 6.
The latest hike marks an increase of 1.24 cents from the prior payout of 26 cents. The aforementioned increase in the quarterly dividend is attributable to CONE Midstream's financial strength and consistently robust performance. The new annualized dividend amounts to $1.09 per unit, up from $1.04 paid earlier, resulting in a dividend yield of 4.53%.
It is the sixth consecutive quarter of consistent distribution increase adopted by CONE Midstream's management. Notably, the company is a master limited partnership formed between CONSOL Energy Inc CNX and Noble Energy, Inc NBL . On Oct 31, 2016 both CONSOL Energy and Noble Energy jointly announced that they had entered into a definitive agreement to separate their upstream Joint Venture (JV).
Investment Plans & JV Separation
CONE Midstream Partners LP entered into a definitive agreement to acquire an additional 25% ownership interest in CONE Midstream DevCo I LP, commonly referred to as the "Anchor Systems". The transaction is for a total purchase consideration of $248 million.
The Partnership currently owns a 75% interest in the Anchor Systems and acquisition of the remaining 25% ownership interest will increase the Partnership's ownership share of the Anchor Systems to 100%. Thereby, helping the company in its long-term prospects and proving it to be accretive to the unitholders.
Moreover, the split of the upstream JV has potential upsides. The new arrangement will boost overall total drilling and production activity within the company's dedicated acreage.
Further, these systematic investments of the company will also help it to boost its earnings in the long term and create an ample visibility regarding the earnings performance of the company.
Industry Outlook for 2017
Oil and Gas Production/ Pipeline industryhas seen the addition of a significant amount - several billions of cubic feet per day - of new natural gas processing capacity using state-of-the-art equipment. Given that the price of liquids is tied to oil, price is considered to be a bigger consideration than processing capacity, at this point.
As per an Energy Information Administration report, the U.S. crude oil production is projected to average 8.8 million barrels per day in 2017. Brent crude oil prices are expected to average $52 per barrel, which reflects an upward correction of nearly 21% from the 2016 levels, while West Texas Intermediate (WTI) crude oil prices are predicted to be an average $51 per barrel.
In 2017, higher rig activity is anticipated in the Marcellus and Utica shale regions than the Haynesville, Fayetteville and other older shale gas basins, where there's still a huge amount of untapped natural gas. It has become more expensive to get the gas out of the ground in the older shale plays, which is why operators have shifted focus from these areas. Moreover, since this industry has a great prospect and CONE Midstream Partners being a major player in this space will also benefit from it substantially.
CONE Midstream has largely outperformed the Zacks categorized Oil and Gas - Production Pipeline - MLP industry over the last 12 months. Shares of the company improved 143.4% compared with the industry's gain of 36.2%.
MLPs typically operate in low risk, slow-growth industries like oil and natural gas pipelines. Cash flow is usually strong and distributions stable over time. The fact that MLPs often offer a higher yield than other stocks makes them more attractive as investment options. They also offer liquidity and tax benefits which add to their appeal.
Zacks Rank & Key Picks
CONE Midstream carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Archrock Partners, L.P. APLP sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Archrock Partners's 2017 estimates inched up 8.9% to 86 cents from 79 cents over the last 60 days. Its shares gained whopping 101.7% in the last 12 months, outperforming the broader industry.
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