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Improved balance sheets, disciplined spending, and free-cash-flow generation should support incremental distribution growth of North American midstream companies in 2023. A small increase in throughput and low-single-digit 2023 Ebitda expansion will likely be aided by tariff hikes and moderate E&P production gains that are restricted by pipeline constraints. The sector is likely better equipped to contend with inflation than many other industries as real assets, index-linked contracts, and above-average distribution yields mitigate inflation and damage returns. Still, limited long-term organic growth opportunities in a challenging regulatory environment suggest M&A will persist.
Talon Custer is the energy infrastructure analyst at Bloomberg Intelligence, the research arm of Bloomberg LP. He has nine years of equity research experience. Mr. Custer initially covered transportation and logistics before shifting to E&Ps and he is currently focusing on LNG and North American midstream. He is a CFA charter holder and has a bachelors degree from the University of Tennessee.
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