The energy midstream sector is currently undervalued compared to historical trading levels, despite the S&P 500 reaching multiple all-time highs. Goldman Sachs predicts a 160% increase in data center power demand by 2030, equating to an additional 3.3 billion cubic feet per day of natural gas demand, which positions midstream companies favorably.
Historically, midstream firms traded at an enterprise value-to-EBITDA multiple of over 13.5 times from 2011 to 2016, but current multiples are significantly lower. Key players like Energy Transfer (NYSE: ET), Enterprise Products Partners (NYSE: EPD), Kinder Morgan (NYSE: KMI), and Antero Midstream (NYSE: AM) are highlighted as potential outperformers, trading at forward EV/EBITDA multiples below 10.
With improved financial health and a shift towards fee-based contracts, these companies are entering a new growth phase. The industry now features lower leverage and stronger free cash flow, making it ripe for investment, particularly given the expected rise in natural gas demand driven by technological advancements in AI.
