Fitch: Cautious Optimism for U.S. Pipeline, Midstream & MLP Sectors in 2010

NEW YORK--(BUSINESS WIRE)--In a special outlook report issued today, Fitch Ratings says that the U.S. Pipeline and Natural Gas Midstream sectors should see more stability in 2010. Although overall operating and financial conditions have improved significantly from a year ago, Fitch expects companies to stay the course by avoiding excess leverage and maintaining the disciplined operating and growth strategies adopted in 2009 with liquidity remaining companies' highest priority.

'Over the short-term, liquidity risks for companies are mitigated by strong cash positions and relatively adequate capacity on existing bank facilities,' said Ralph Pellecchia, Senior Director at Fitch. 'Ratings should remain relatively steady throughout 2010 as the economy slowly recovers.'

The operating performance for natural gas pipelines is expected to remain fairly stable given expected flat demand for natural gas and the benefits of stable rate design. However, the pace of the economic recovery and its effect on natural gas liquids (NGL) commodity prices will have a more pronounced effect for midstream companies, which should see average annual margins settle near current levels but well below record margins recorded in 2008.

Sector Outlook Summaries:

--Natural Gas Pipelines have a stable 2010 outlook. However, credit measures for companies funding large expansion projects will likely remain under pressure through 2010.

--Product Pipelines also have a stable 2010 outlook. The pace of the economic recovery will affect demand for oil products and transportation volume. However, following reduced throughput in 2009, product demand should be stabilizing.

--The 2010 outlooks for Midstream Services are mixed. Gas gatherers have a stable outlook supported by flat volumes and fixed fee contracts. Processors, however, face greater uncertainty given their exposure to commodity prices.

--Retail Propane Distributors maintain a modestly negative outlook in 2010 reflecting concern over commodity pricing, a weak economy and customer conservation.

The report, titled 'Pipeline/Midstream/MLP 2010 Outlook; Time for Cautious Optimism' is available at 'www.fitchresearch.com'.

Additional information is available at www.fitchratings.com.

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