Midstream/MLPs: Summer Sell-Off Feels Overdone

Energy equities retreated from their relative highs in June as the Delta variant spread, the value trade sputtered, and oil prices weakened following the OPEC+ announcement in July. While midstream sold off with oil and energy stocks, the fundamental picture for midstream improved in many respects as reflected by positive estimate revisions coming out of 2Q21 earnings season. The outlook for midstream remains constructive with a compelling investment case driven by attractive yields, discounted valuations, growing free cash flow, and buyback potential. That said, some challenges persist for energy equities broadly.