DTM - EnLink Midstream: Getting Pulled Along By Data Centers And LNG Exports

2024-06-13 09:54:35 ET

Summary

• EnLink is cheaply valued due to its assets in Tier-2 basins.
• These assets have spare capacity that will be consumed by natural gas consumption fueled by LNG exports and data centers.
• Being able to increase profitability with minimal CAPEX spending will result in large FCF increases through the remainder of this decade.
• I rate ENLC a BUY due to a cheap valuation and ability to grow the distribution.

Thesis

Enlink Midstream ( ENLC ) is a small cap, multi-basin midstream company that focuses on natural gas gathering, processing and fractionation. The company has assets in the Permian, Haynesville, Oklahoma STACK, and Barnett Shales.

While in some cases, having a disconnected portfolio is an operational disadvantage, I believe the tables will turn in EnLink’s favor with the anticipated demand stemming from both LNG exports and data center power consumption. These two driving forces are substantial enough that it will take an “all of the above” basin approach to meet the demand requirements that are projected to occur through the end of this decade....

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