-- Midstream energy firms are set for a busy earnings week after a strong run in the sector, with rising oil prices and robust volumes underpinning investor optimism, RBC Capital Markets strategists said in a note on Friday.
RBC said the Alerian Midstream Index climbed 4.3% in the week ended Apr. 30, outperforming the broader S&P 500, which rose 1.4%. Year-to-date, the AMZ is up 19.5%, significantly ahead of the S&P 500's 5.3% gain.
Though the sector has also outpaced defensive segments such as utilities, RBC said it continues to lag upstream oilfield services and exploration and production companies.
Crude prices provided a tailwind, with front-month West Texas Intermediate futures rising about 10% during the week to around $105 per barrel, while US natural gas benchmark Henry Hub gained about 6% to $2.77 per MMBtu.
Targa Resources led weekly gains, climbing 8.4% as investors responded to higher crude prices and improving dynamics in the Permian Basin.
Rising gas-oil ratios in the region, highlighted in Enterprise Products Partners LP's earnings, are boosting demand for processing and takeaway capacity, RBC said.
The bank said additional capital spending by ConocoPhillips (COP) in the Delaware Basin has also reinforced expectations for incremental activity, supporting Targa's growth outlook.
Valuations remain elevated but supported by earnings visibility. RBC estimates the midstream universe is trading at about 10.2 times enterprise value to 2027 EBITDA, suggesting investors are willing to pay a premium for stable cash flows and exposure to rising US hydrocarbon exports.
Meanwhile, RBC said recent earnings have reinforced that narrative. Enterprise Products Partners (EPD) beat expectations on stronger volumes and gains in natural gas marketing, while Oneok (OKE) raised its 2026 adjusted EBITDA guidance following a Q1 beat and a more constructive outlook for volumes.
RBC analysts say export demand, partly driven by disruptions in the Middle East, could provide an additional tailwind for companies with Gulf Coast exposure, including Targa and Energy Transfer.
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