Why Midcoast Energy Partners LP (NYSE:MEP) Shares Could Be in for More Upside

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Midcoast Energy Partners LP (NYSE:MEP) are trading at $9.40, up 4.44% on Tuesday, and around the upper half of its 52-week range between $3.76 to $13.57. The company’s stock has shown strong bullish momentum in May, thanks to upbeat earnings and analysts’ upgrades.

Midcoast Energy Partners is a limited partnership that serves as Enbridge Energy Partners LP’s primary vehicle for owning and operating its natural gas and natural gas liquids in the United States. Its gathering, processing and transportation business includes natural gas and NGL gathering and transportation pipeline systems, natural gas processing and treating facilities, condensate stabilizers and an NGL fractionation facility. Its logistics and marketing business provides marketing services of natural gas, NGLs and condensate received from its gathering, processing and transportation business.

In its latest earnings report, the company shared that it is working with Enbridge Energy Partners to explore a broad range of strategic alternatives for their jointly owned gas business Midcoast Operating. This led Credit Suisse to announce an upgrade for Midcoast Energy Partners from underperform to neutral while raising its price target from $5 to $6, fueling yet another rally for the stock.

Later on, stock analysts have started speculating about a potential acquisition by Enbridge, as this would enable them to reset its own distribution to a more sustainable long-term level. Apart from that, the ongoing rebound in commodity prices could keep natural gas and natural gas liquids prices afloat and thereby boost Midcoast Energy Partners’ numbers.

WTI crude oil has surged past the $50/barrel and appears poised for more gains while Brent crude oil climbed to $51.45/barrel. This has also been supported by rising demand from China, as evidenced by the latest trade balance, and speculations that the US Fed could keep interest rates unchanged for much longer. Unless this market sentiment changes throughout the month, energy-related shares such as Midcoast Energy could stay afloat.

 

DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.