What are we looking for?
With all the pipeline talk these days, my colleague Rob Belanger and I decided to take a closer look at the sector.
We started with pipeline companies in North America and whittled them down to those with an enterprise value (EV) greater than $4-billion. Enterprise value comprises market capitalization, plus debt, minority interest and preferred shares, minus cash and equivalents. We have ranked our companies from largest to smallest.
EV/EBITDA – enterprise value divided by earnings before interest, taxes, depreciation and amortization – is one of the most commonly used valuation metrics. We are looking for a low number.
The price-to-cash-flow ratio is a good gauge of a company’s value and a lower number is preferred.
Return on equity reveals how much profit a company generates with the money shareholders have invested. A high number is favoured.
Operating margin measures what portion of a company’s revenue is left over after paying for variable costs such as wages and inventory. If a company has an operating margin of 12 per cent it means that it makes 12 cents before interest and taxes for every dollar of sales.
We have also shown current dividend yield and one-year total return.
What did we find?
No company scored better than the average in all six categories, and only two companies scored better than the average in five categories, El Paso Pipelines and Buckeye Partners.
El Paso is owned by Houston-based Kinder Morgan, which is the largest natural gas pipeline and storage operator in the United States. El Paso’s business consists of 21,000 kikometres of pipe and storage for over 100 billion cubic feet of natural gas.
Buckeye Partners, also in Houston, has been around since 1886 and owns 9,600 km of pipe. The company also operates or maintains third party pipelines under agreements. Its flagship marine terminal in the Bahamas is one of the largest crude oil storage facilities in the world, and a premier global logistics hub.
Investors are urged to conduct further research, or contact an investment professional before making any investment decisions.
North American pipeline companies
|Energy Trnsfr Equity||ETE-N||55.70||17.9|
|Energy Trnsfr Ptnrs||ETP-N||46.06||16.7|
|Plains All American||PAA-N||25.97||11.8|
All currencies are local. Source: Bloomberg and Wickham Investment Counsel Inc.
% 1 yr.
|Energy Trnsfr Equity||ETE-N||55.70||17.9||10.1||15.9||5.3||3.9||48.4|
|Energy Trnsfr Ptnrs||ETP-N||46.06||16.7||9.1||5.2||5.5||6.9||32.8|
|Plains All American||PAA-N||25.97||11.8||8.0||14.4||3.7||4.2||25.7|
|El Paso Pipeline||EPB-N||13.59||12.3||10.8||24.8||59.1||5.8||19.5|
|OGE Energy Corp.||OGE-N||10.02||10.2||8.5||12.5||19.6||2.3||33.2|
- Kinder Morgan Inc$17.590.00(0.00%)
- Enterprise Products Partners LP$25.920.00(0.00%)
- Enbridge Inc$51.760.00(0.00%)
- TransCanada Corp$52.250.00(0.00%)
- Energy Transfer Equity LP$12.120.00(0.00%)
- Energy Transfer Partners LP$34.940.00(0.00%)
- Williams Companies Inc$18.810.00(0.00%)
- Plains All American Pipeline LP$22.330.00(0.00%)
- ONEOK Partners LP$35.100.00(0.00%)
- Magellan Midstream Partners LP$71.790.00(0.00%)
- Pembina Pipeline Corp$37.620.00(0.00%)
- Boardwalk Pipeline Partners LP$16.430.00(0.00%)
- OGE Energy Corp$29.790.00(0.00%)
- Buckeye Partners LP$71.140.00(0.00%)
- Sunoco Logistics Partners LP$29.160.00(0.00%)
- DCP Midstream Partners LP$32.920.00(0.00%)
- Spectra Energy Partners LP$49.780.00(0.00%)
- NuStar Energy LP$49.590.00(0.00%)
- Teekay LNG Partners LP$13.650.00(0.00%)
- Genesis Energy LP$32.000.00(0.00%)
- Veresen Inc$9.340.00(0.00%)
- Updated May 2 4:00 PM EDT. Delayed by at least 15 minutes.