2020 Marked A Key Inflection Point For The Midstream Energy Sector
In late 2019, the midstream energy sector was nearing the completion of a multi-year restructuring process. Simplification transactions across the sector had effectively eradicated complex corporate structures and costly incentive distribution rights. Equity capital needs had nearly all been eliminated, which was a first for a heavily capital-intensive growth sector. Midstream companies shifted to self-funded capital programs. The arguably disruptive structural transformation positioned the sector on stronger footing with increased distribution coverage and a renewed focus on capital returns and positive free cash flow (FCF) generation. For these reasons and more, we were optimistic on the future total return potential for the asset class.
