pipeline flow way down??

[bobs]

I assume the flow between January and the present is wasy down since oil and gas usage is lower as the economy has contracted.
How are the pipelines paid and won't the earnings be severally hurt with the lower flow?

[dan_s]

Most of the pipelines are paid for how much product they gather, move, process and store. They are "toll takers". Midstream revenues will be down a bit in Q2, but they should bounce back. You can find forecast models for each midstream company in our High Yield Income Portfolio on the EPG website. Just click on the High Yield tab after you log on.

They were all updated in June and the companies provide guidance.

You can also find revenue forecasts on Yahoo Finance.

[bobs]

But if they gather, move and process less and store more which perhaps somewhat offsets the first 3 earnings niches wouldn' t the hit be bigger or does it show up in Q3 earnings?
Are the drillers locked in to pay the pipelines at flat fee whether they pump more or less oil and gas and we know they have been pumping alot less recently?
Maybe I dont understand the business model??
Thanks for the help!

[dan_s]

They all have different arrangements with their customers. Keep in mind that movement of natural gas and NGLs was not as impacted as the midstream companies that focus on crude oil.

The business model is actually simple. They build gathering systems, processing facilities, pipelines and storage facilities. Then the upstream companies pay them for gathering, processing, transportation of their oil, gas and NGL to market or for storage. A lot of the storage fees actually come from the refiners.

Some of the midstream companies do take control of the commodities. ONEOK is in that group.

Download the forecast models for a few of the midstream companies and go through them line by line or just cut to the bottom and focus on cash flow from operations. That is what pays the bills and the dividends.