Crestwood Equity Partners, LP (CEQP) is an energy MLP that owns and operates midstream assets primarily located in the Marcellus Shale, Bakken Shale, Delaware Permian Basin, PRB Niobrara Shale, Barnett Shales, and Fayetteville Shale regions, notes Marty Fridson, editor of Forbes/Fridson Income Securities.
CEQP is engaged in the gathering, processing, compression, storage, and transportation of natural gas; storage, transportation, terminaling, and marketing of NGLs; and gathering, storage, transportation, terminaling and marketing of crude oil.
Crestwood has demonstrated scale and diversification through disciplined growth and has successfully navigated the COVID-19 pandemic. The partnership’s basin diversification has been achieved with moderate leverage and good cash flow.
The MLP reported 4Q 2020 net income of $27.8 million, versus $47.2 million a year earlier. Earnings per share of $0.28 missed analysts’ $0.43 estimates. However, adjusted EBITDA of $165.1 million rose 11.0% from a year ago and topped expectations.
More noteworthy was distributable cash flow of $106.3 million, which grew 18.6% year-over-year and covered common unit distributions by a solid 2.3x.
Crestwood revised its 2021 guidance upward, a result of stronger than expected commodity prices and tight cost control. Based on a favorable outlook for commodity prices in 2021, the partnership expects full-year net income of $100-$150 million and adjusted EBITDA of $575-$625 million.
At the current price of $30.45, the current annualized yield is 8.21%. This MLP is suitable for medium- to high-risk taxable portfolios. Distributions are taxed on a variable basis and EQP issues a K-1. Buy at $35.00 or lower, which equates to a 7.14% annualized yield.
