Midstream Themes, Trades, and 2Q26 Earnings Preview

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Midstream Themes, Trades, and 2Q26 Earnings Preview

Barclays | Midstream

As shown in Figure 1 and Figure 2, the sensitivity of midstream returns to the price of oil has

declined over time, which we think reflects lower financial leverage and a maturation of

business models. This trend is similar to what the E&P sector demonstrated (Top Themes,

Trades Ideas, and 2Q26 Earnings Preview, July 6, 2026), although the magnitude of the E&P

decline is greater. Somewhat counterintuitively, the midstream sector actually showed a greater

oil price returns beta than E&P back in the 2005-09 period. Although the sensitivity is muted

versus what it once was, it is not uncorrelated, so our view remains that directional weakness in

oil prices can seep into midstream returns.

Within midstream, we discussed in After the Windfall (June 18, 2026) our view that a post-Iran

conflict normalization (real or perceived) could have a more negative effect on Plains (PAA),

ONEOK (OKE) and Western Midstream (WES), which were among the best sector performers in

2Q26 and have business models with greater exposure to upstream volume dynamics than the

overall sector, in our view. Conversely, although ET also benefits from a higher price

environment and increased export dynamics in several of its segments, the company is

considerably larger and better diversified than the PAA, OKE and WES cohort, in our view.

Specifically, we think that ET can trade tight of OKE in the long end and recommend swapping

from OKE 2055s (+130/127bp) into ET 6.3% 2056s (+133/130bp) at a roughly even spread.

Although OKE has a lower leverage target than ET, and we see potential for management to

improve that target (3.5x) over time, we project comparable leverage in 2026, and with lower

execution risk for ET, in our view.