I've searched around the forum for oil and gas related topics and nearly all the posts were concerned with upstream E&P companies.
I am wondering if anyone could share some insight on how midstream companies should be valued. It seems to me that the NAV model is mostly for E&P companies since its based on proven reserves and production - neither of which a mainly midstream company has.
In particular, I am concerned with finding an appropriate method of intrinsic valuation so I am not worried about comps/precedents. I thought about free cash flow DCF, but the company I'm looking at has huge CapEx which would depress free cash flow and give a lot of weight to terminal value. Is this a case where the discounted dividend model might work? I appreciate any help. Thanks
DDM is typical for public midstream companies due to stability of cash flows. Ignore growth capex (usually entirely funded via capital markets) but be sure to account for maintenance capex. Alternatively you can do the full FCF and just run the model out past visible capex spend to fund a "normal" run rate.
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