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Midstream M&A Gains Momentum as Permian, Power Demand Support Growth, RBC Says

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Midstream mergers and acquisitions are accelerating as companies pursue scale and new volumes, while RBC's preferred picks offer growth tied to gas, power and Permian demand, RBC Capital Markets said in a Friday note.

The Alerian Midstream Index gained 0.6% for the week ended Sep. 10, compared with a 2% decline for the S&P 500 as West Texas Intermediate crude rose about 12% to $102.48 per barrel.

Year to date, the AMZ has advanced 25.5% versus a 10.9% rise for the S&P 500, outperforming utilities and real estate investment trusts by 2,473 and 1,305 basis points.

The AMZ remains behind oilfield services and exploration and production stocks by 2,208 and 2,933 basis points, respectively, while Henry Hub natural gas declined about 3% to $2.83 per million British thermal units.

Venture Global (VG) led RBC's coverage universe with a 7.0% weekly gain, helped by higher Dutch Title Transfer Facility prices, while Cheniere Energy (LNG) fell 4.5% after missing the latest S&P 500 rebalance.

Master limited partnerships rose 0.4% over the week and outperformed C-corporations, which slipped 0.1%, while RBC estimates its coverage universe trades at 10.3 times 2027 estimated enterprise value to EBITDA.

RBC said midstream deal activity has accelerated, citing ONEOK's (OKE) acquisition of Brazos Midstream's Permian Midland assets and renewed market attention on a potential Kinetik (KNTK) sale.

RBC has long viewed Kinetik Holdings as an attractive acquisition target because of its Permian presence, natural gas liquids exposure and New Mexico sour-gas capabilities, which could add scale and near-term growth.

Kinetik could benefit from stronger customer demand in New Mexico, including an expansion of its KL2 processing plant, which RBC expects to enter service in mid-2028.

RBC also noted that external insurance capital could help finance acquisitions.

The US Third Circuit Court of Appeals vacated a water-quality certificate for the Northeast Supply Enhancement project on technical and procedural grounds, sending the matter back to the New Jersey Department of Environmental Protection.

Williams (WMB) does not expect the ruling to affect construction and continues to target an in-service date in the fourth quarter of 2027, while viewing the remand as a path to resolve the outstanding issues.

RBC sees Kinetik well positioned for growth in the second half of 2026 and beyond as new Permian gas takeaway capacity comes online and producer interest rises across the Northern Delaware Basin.

A May 2026 federal lease sale generated about $4 billion in bids, compared with the prior record of $972 million in 2018, underscoring the scale of producer interest in the Northern Delaware Basin.

Kinetik Holdings has built its sour-gas handling system, giving it an advantage over new entrants because permits for acid-gas injection wells can take more than three years.

RBC expects Kodiak Gas Services (KGS) to deliver about 16% annual adjusted EBITDA growth over five years, supported by Permian production, tight compression capacity and rising data-center power demand.

RBC favors Targa Resources (TRGP), citing customer-backed growth projects that reduce capital-spending risk, expanded customer agreements and exposure to well-capitalized Permian producers. Rising gas-to-oil ratios could also support mid-single-digit gas growth.

RBC also favors Williams, which it sees benefiting from rising power and natural gas demand through 2030 and beyond. The company targets more than 11% adjusted EBITDA growth through 2030.

Midstream M&A Gains Momentum as Permian, Power Demand Support Growth, RBC Says

What else is happening in Commodities?

Commodities

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Commodities

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Commodities

US Natural Gas Update: Prices Rebound on Short Covering, Global Energy Strength

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