Midstream & Natural Gas: What Matters the Most This Week: AM, EPD, TRP, DTM, PPL, ENB

Research evidence excerpt

Midstream & Natural Gas: What Matters the Most This Week: AM, EPD, TRP, DTM, PPL, ENB

Valuation Method and Risk Statement

Key risks for pipeline partnerships include the following: unexpected prolonged and

precipitous decline in commodity prices; interest rate risk; risks associated with leverage;

environmental risks; and regulatory risks associated with the Federal Energy Regulatory

Commission’s governance over pipeline tariff rates. Key risks for marine transportation

partnerships include the following: OPA 90 costs; potential changes to the Jones Act; and

environmental risks. Key risks for coal partnerships include: reliance on third party operators;

decline in coal prices or production; and environmental risks. Key risks for propane

partnerships include the following: weather (particularly warm winters) as with all propane

and heating oil distribution companies; prolonged and sharp increases in wholesale prices of

propane and heating oil caused by changes in supply or other market conditions; dependence

on acquisitions for growth; and interest rate risk (as ALL MLP units, tend to trade inversely

with interest rates). Unitholders may be required to file taxes in states where the partnership

conducts business and should consult a tax advisor for further assistance. For most

Midstream/MLPs our methodology averages valuations derived from a DDM and EV/EBITDA

multiple.

Oil Sands - Valuation Method: We utilize an EV/EBITDA methodology for valuing the Oil Sands

names. Risks to our price targets across Oil Sands includes lower crude prices. Blowout in diffs

and weaker refining margins. Extreme cold weather conditions are always a risk to mining

operations.

Refiners - Valuation Method: We utilize an EV/EBITDA methodology for valuing the refining

names.