Midstream is not simply a "toll road" business.
Midstream is a diverse array of assets connecting abundant supply with emerging sources of demand and volatile global markets. Recurrent's Midstream Energy Infrastructure Strategy invests across the systems that move, process, store and deliver North American energy. We believe successful midstream investing starts by understanding exactly how each asset generates cash flow and what expectations are already embedded in its valuation.
Available through separately managed accounts, the Recurrent MLP & Infrastructure Fund (RMLPX), and the Alma Recurrent Energy Infrastructure UCITS.
The sector label hides the important differences.
Pipelines, gathering systems, processing plants, storage assets and export terminals may all sit in the same investment category. Their economics can be radically different.
We count more than ten distinct business models within midstream, each with different customers, contracts, volume exposure, commodity sensitivities, capital requirements and useful lives.
Different infrastructure businesses can produce very different return profiles.
Some assets are closely tied to a specific basin, customer or economic activity.
Others can remain strategically useful across multiple commodity and capital cycles.
We have spent years studying what actually drives midstream returns.
Recurrent's research followed the sector from excessive leverage, through balance-sheet repair and capital restraint, into the free-cash-flow model that defines midstream today.
Midstream's Journey Back from "Junk"
How the sector tried to fund growth and distributions at the same time, accumulated excessive leverage, and ultimately rebuilt itself around lower capital spending, stronger balance sheets and free cash flow.
The transformation of midstream was not primarily a commodity story. It was a capital-allocation and financing story.
Read the full interactive researchExcess leverage and dependence on external capital had become central risks.
Falling leverage pointed toward a return to investment-grade balance sheets.
Lower capex could materially improve free cash flow and shareholder economics.
Stronger balance sheets and capital restraint remain defining features of the sector.
Pipelines can make money in very different ways.
Midstream revenues can depend on volumes, contractual protections, commodity prices or some combination of all three. The mix varies materially from asset to asset.
How much moves?
Throughput can depend on production, demand, utilization, basin activity and where an asset sits in the value chain.
Who pays, and for how long?
Minimum-volume commitments, take-or-pay arrangements, tariff structures, contract duration and customer quality all shape cash-flow durability.
What risk remains?
Some assets have direct commodity exposure. Others experience it indirectly through volumes, customer economics or utilization.
We spend our days understanding how much of a company's cash flow comes from each source, how durable those economics are, and whether the valuation appropriately reflects them. That work matters more to us than the broad midstream label.
Returns tell us more than a headline yield.
We use returns on invested capital and enterprise value relative to invested capital alongside traditional midstream measures to compare businesses with different asset lives, risk profiles and cash-flow structures.
Understand the economics
Historical and prospective returns, capital requirements, balance-sheet strength and asset durability.
Understand the cash flow
Volume exposure, contracts, customers, commodity sensitivity and asset utilization.
Compare it with the price
We look for businesses where valuation offers attractive compensation for the durability and risks of those cash flows.
Specialist investing informed by years of sector research.
We believe understanding midstream requires more than knowing the sector. It requires understanding the individual assets, cash flows, capital structures and valuations beneath it.