Next Steps for North American Midstream Oil and Gas

摘要

As the end of 2020 nears, North American midstream players are looking for a path to emerge from this year's plunge in global oil demand spawned by the coronavirus pandemic and pullbacks in production by oil and gas producers. The price decline is the latest blow to the industry's fortunes following a tumultuous decade that has seen a debt-driven investment boom that started in 2010, followed by a phase of de-leveraging and capital discipline in the latter half of the decade. While analysts were cautiously optimistic entering 2020, the pandemic quickly froze the positive momentum. Emerging from the current market downturn will require midstream companies to assess their performance across two dimensions: their historic ability to deliver returns, which we measure using return on invested capital (ROIC), and their degree of leverage. We assessed 23 of the largest North America-focused midstream companies (representing roughly $350 billion in total market value) on these two dimensions. Our analysis revealed variance within the group: 1. Eight companies - which collectively represent about 45%, or $160 billion, of the group's total market value - entered the crisis in a vulnerable condition and are even more vulnerable today.