Summary
- Midstream companies are largely expected to see moderate year-over-year growth in adjusted EBITDA in 2025.
- Energy infrastructure names with multi-year outlooks generally see annual EBITDA growth of around 5-10% over the next few years.
- Company-level financial guidance adds to the constructive outlook for midstream and provides important context for anticipated dividend growth.
Midstream is unique within energy for its fee-based businesses, namely the transportation, storage, and processing of hydrocarbons. Providing services for fees under long-term contracts results in stable and predictable cash flows. Midstream’s visibility to future cash flows sets it apart from other energy subsectors whose profits depend on volatile commodity prices. Ongoing EBITDA growth is one of the underpinnings for a positive midstream outlook into 2025. EBITDA guidance also provides important context to expected dividend growth. This note examines 2025 EBITDA guidance for companies with forecasts and also looks at multi-year guidance.
2025 EBITDA Guidance: Mostly Moderate Growth, Acquirers Represent Outliers.
Company-level financial guidance helps frame midstream’s growth profile and adds confidence around midstream’s ability to deliver on dividend growth (discussed last week). More companies will provide 2025 financial guidance with their fourth quarter results in the coming weeks. In the meantime, those that have already issued guidance are largely pointing to moderate or mid-single-digit growth as shown in the chart below.
Sunoco (SUN) and ONEOK (OKE) stand out for more significant year-over-year growth, which reflects acquisitions made in 2024. SUN acquired NuStar Energy in May 2024, while ONEOK acquired Medallion Midstream and a controlling interest in EnLink Midstream (ENLC) in 2H24. OKE plans to acquire the remaining publicly held ENLC units, and the transaction is expected to close in 1Q25.
In recent quarters, there has been a significant emphasis on the growth opportunities related to natural gas given expectations for a step-change in North American demand (read more). A handful of gas pipeline expansion projects have already been announced, such as Williams’ (WMB) Southeast Supply Enhancement and Kinder Morgan’s (KMI) Mississippi Crossing Project. To be clear, these projects are expected to come online in late 2027 and late 2028, respectively.
For some companies, year-over-year EBITDA growth towards the end of this decade may look noticeably different from what is expected for 2025. More broadly, midstream EBITDA growth can be lumpy as new projects start up and begin generating cash flows. Even when companies provide long-term targets for EBITDA growth, the year-to-year changes are not likely to be smooth.
Long-Term Targets Reinforce Moderate Growth Expectations.
Accompanying more detailed year-ahead guidance, a number of midstream companies provide multi-year outlooks for growth in adjusted EBITDA. Companies will often reference compound annual growth rates (CAGR) given the potential for step-changes with major project startups. While acknowledging that growth may not be linear, long-term targets help frame midstream’s organic growth profile over time.
In the US, Williams (WMB) expects a long-term adjusted EBITDA growth rate of 5-7%, and DT Midstream (DTM) also targets 5-7% adjusted EBITDA growth (read more). Hess Midstream has been guiding to over 10% growth in adjusted EBITDA and free cash flow for 2025 and 2026 (read more).
The Canadian midstream companies typically provide multi-year outlooks. TC Energy (TRP CN) has guided to a CAGR of 5-7% for comparable EBITDA from 2024 to 2027. In December, Enbridge (ENB CN) reaffirmed its 7-9% EBITDA growth expectation for 2023 to 2026. The company’s longer-term outlook will be discussed at its annual investor day in early March.
Keyera (KEY CN) has guided to a 7-8% CAGR for fee-based adjusted EBITDA for 2024 to 2027 (excludes marketing). Notably, the expected growth is largely coming from filling existing capacity that requires minimal investment (read more). Similarly, Pembina (PPL CN) is targeting a 4-6% CAGR for fee-based adjusted EBITDA per share from 2023 to 2026. For context, Canadian names represent 27.1% of the Alerian Midstream Energy Select Index (AMEI) by weighting as of January 13.
Bottom Line:
Expectations for continued moderate EBITDA growth add to the constructive outlook for midstream in 2025 and beyond, while adding confidence to anticipated dividend growth.
AMEI is the underlying index for the Alerian Energy Infrastructure ETF (ENFR) and the Alerian Energy Infrastructure Portfolio (ALEFX).
Related research:
Midstream/MLP Dividend Outlook: More Growth to Come
Hess Midstream CFO: Growth Opportunities, Balance Sheet Strength & Shareholder Returns
An Almost-Free Lunch? Capital-Efficient Midstream Growth
For more news, information, and analysis, visit the Energy Infrastructure Channel.
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