By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists generally agreed that while midstream companies like ET and ENB have defensive qualities due to their toll-like cash flows and regulatory barriers, they are not entirely immune to risks such as volume reductions, contract renegotiations, and regulatory pushback in a low-price oil environment. Chevron's high EPS growth projections were met with skepticism due to potential execution risks and energy transition headwinds.
Risk: Volume reductions and contract renegotiations due to prolonged low-price oil environment
Opportunity: Regulatory barriers providing a floor on valuation for ENB and ET
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Energy Transfer and Enbridge’s “toll road” pipelines will generate steady profits.
Chevron’s scale and diversification will insulate it from choppy oil prices.
Brent crude oil hit a multi-year high of $119.50 per barrel in March, following the initial outbreak of the Iran war. The conflict disrupted shipments through the Strait of Hormuz, which accounts for roughly a quarter of the world's maritime oil trade, and boosted many oil stocks.
But as of this writing, Brent crude trades at about $87 per barrel. The situation in the Middle East remains volatile, but intermittent peace talks, ceasefires, and discussions to fully reopen the Strait of Hormuz have all brought oil back down from its recent peak.
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That pullback hurt upstream companies like Occidental Petroleum (NYSE: OXY), which benefit the most from soaring oil prices. However, it's still a great time to invest in midstream companies, which operate pipelines and other infrastructure to transport oil, as well as in the world's largest integrated energy giants. These three oil stocks fit that description: Energy Transfer (NYSE: ET), Enbridge (NYSE: ENB), and Chevron (NYSE: CVX).
Energy Transfer operates more than 140,000 miles of pipeline across 44 states. Enbridge operates 70,000 miles of pipelines and smaller feeder lines across North America.
Energy Transfer, based in Texas, transports more natural gas than crude oil through its pipes. Enbridge, based in Canada, transports more crude oil than natural gas. Energy Transfer's infrastructure is concentrated in the southern U.S., while Enbridge's pipelines connect Canada to the eastern seaboard, the Midwest, and the Gulf Coast regions in the U.S.
Both of these companies are well insulated from volatile prices because they charge upstream and downstream companies "tolls" to use their infrastructure. As long as those resources flow through their pipes, they can generate plenty of cash to fund their distributions and dividends.
Energy Transfer, which operates as a master limited partnership (MLP), blends its income with a return of capital to pay a high forward distribution yield of 7%. Enbridge, which operates as a standard Canadian corporation, pays a forward dividend yield of 5.1%.
Both stocks are also still reasonably valued because they didn't rally as much as other oil stocks in response to the Iran war. Energy Transfer trades at just 11 times its forward earnings per unit (EPU), while Enbridge trades at 26 times forward earnings. Therefore, these two pipeline stocks are great ways to profit from the oil market without too much exposure to choppy oil prices.
Chevron, one of the world's largest integrated energy companies, operates upstream, midstream, and downstream businesses. It has a presence in 180 countries, but it gets most of its oil from the U.S., Kazakhstan, and Australia rather than from the Middle East.
Chevron's scale and diversification make it an evergreen stock to hold even if oil prices collapse. While declining crude oil prices will hurt its upstream business, they could help its downstream business by reducing its input costs. Its midstream business should also continue to grow regardless of near-term swings in the oil market.
That's why Chevron has raised its dividend annually for 39 consecutive years. If it maintains that streak for 50 years, it will become a Dividend King. It currently pays a forward yield of 3.8%.
Chevron expects to increase its oil and gas production by 2%-3% annually through 2030. That growth will be fueled by the expansion of its Tengiz Field in Kazakhstan, upgrades for its biggest oil field in the Permian Basin, new projects in Guyana (one of the world's fastest-growing oil regions), deepwater projects across the Gulf of Mexico, and natural gas projects in Australia. In other words, it still has plenty of irons in the fire.
From 2025 to 2028, analysts expect Chevron's EPS to grow at a 24% CAGR. Its stock still looks like a bargain at 12 times this year's earnings, and it's a stock I'd be comfortable holding for the long term, regardless of what happens to oil prices this year.
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Leo Sun has positions in Energy Transfer. The Motley Fool has positions in and recommends Chevron and Enbridge. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Midstream dividend safety is overstated because it assumes producer solvency, which is highly sensitive to sustained sub-$80 Brent pricing."
The article's 'toll road' thesis for ET and ENB is a classic defensive play, but it ignores the significant counterparty risk inherent in midstream contracts. If Brent stays below $80, upstream producers—especially smaller Permian players—face severe margin compression, potentially leading to contract renegotiations or bankruptcies that could disrupt those 'steady' cash flows. While CVX is a quality operator, the 24% EPS CAGR projection through 2028 feels overly optimistic, heavily reliant on flawless execution in the Tengiz field and Guyana. Investors should be wary of the 'safe' yield narrative; in energy, the dividend is only as safe as the solvency of the producers filling the pipes.
Midstream assets are often backed by take-or-pay contracts that prioritize infrastructure payments even during producer distress, making the 'toll road' model more resilient than the article's critics suggest.
"Midstream (ET, ENB) deserves the bullish case; Chevron's valuation assumes a production growth thesis that the article never tests against energy transition and capex discipline."
The article conflates two separate theses without scrutiny. Midstream (ET, ENB) is genuinely insulated from price volatility via toll-like cash flows—that's defensible. But Chevron at 12x forward earnings with 24% EPS CAGR (2025–2028) assumes sustained production growth and no major capex surprises. The article omits: (1) energy transition headwinds on long-cycle projects, (2) whether Guyana/Tengiz ramp-ups hit guidance, (3) refinancing risk if rates stay elevated. Oil at $87 is still well above pre-2022 levels; the 'pullback' framing obscures that we're not in a structural glut. Midstream is the safer play here.
If oil drifts to $70–75 and stays there, even toll-road pipelines face volume compression as upstream capex gets shelved; Chevron's 2–3% annual production growth becomes unachievable, and the 24% EPS CAGR evaporates.
"Lower oil prices risk eroding midstream volumes and Chevron's growth targets faster than the article acknowledges."
The article frames ET, ENB, and CVX as insulated from the Brent drop to $87 because of toll-based cash flows and diversification. Yet it underplays volume risk: sustained sub-$90 oil could prompt upstream capex cuts, reducing throughput on ET's 140k miles and ENB's Canadian routes within 12-18 months. Chevron's 24% EPS CAGR forecast through 2028 hinges on Permian and Guyana ramps that face permitting and cost inflation delays. High ET distribution yield at 7% also embeds MLP tax complexity and interest-rate sensitivity not addressed. These names may lag if oil rebounds on Hormuz reopenings.
Contracted minimum-volume commitments on major pipelines can protect near-term distributions even if upstream spending slows, and Chevron's downstream segment provides a direct offset to lower crude prices.
"A material macro or demand shock could squeeze volumes and debt-financed cash flows, risking multiple compression for ET/ENB and limiting CVX’s upside despite current yields."
The article paints midstream tolls as a quasi-inflation-proof anchor and praises Chevron’s diversified earnings. The missing risk is that a renewed demand slowdown or a sharper oil price pullback could reduce throughput and cash flow, even with stable tariffs. ET’s MLP structure leaves it vulnerable to rising financing costs and potential distribution discipline; ENB needs ongoing capex for expansions, which could be delayed or over budget; CVX’s downstream gains depend on spreads that can compress if commodity markets soften. In short, valuation looks rich if oil stays range-bound or dips, and a negative macro shift could compress multiples despite steady yields.
The strongest counter is that midstream cash flows are relatively resilient to price moves if volumes hold; disciplined capital allocation and long-term tolls could keep distributions intact, supporting a slower but steady upside even with some price weakness.
"Regulatory barriers to entry provide a valuation floor for midstream assets that outweighs short-term volume fluctuations from upstream producers."
Grok and Gemini are missing the regulatory and geopolitical moat surrounding ENB and ET. These aren't just 'toll roads'; they are critical infrastructure with immense barriers to entry. Even if Permian volumes dip, the replacement cost of these assets is astronomical, providing a floor on valuation that pure upstream players lack. The real risk isn't producer bankruptcy—it's the regulatory capture and permitting hell that prevents new supply, which actually strengthens the pricing power of existing, fully-depreciated pipeline networks.
"Regulatory moat protects *asset value* and *new competition*, not *throughput* or *contract renegotiation risk* in a sustained low-oil regime."
Gemini's regulatory moat argument is seductive but conflates two things: barriers to *new* pipeline construction versus pricing power *over existing contracts*. ENB and ET can't unilaterally raise tolls on take-or-pay deals; their leverage is real but bounded. The true risk Gemini sidesteps: if upstream capex collapses, producers walk away from marginal projects entirely, shrinking the pie these tolls collect from. Depreciation helps margins, not volumes.
"Regulatory moats support volumes but not against broad production cuts from sustained low oil prices."
Claude underplays how Gemini's regulatory barriers could sustain volumes by limiting alternatives for Permian producers, bolstering ET and ENB throughput. However, this moat doesn't prevent absolute production declines if Brent remains below $80, shrinking the overall cash flow pool. The unaddressed risk is contract renegotiation pressure during prolonged low-price environments, where upstream solvency trumps infrastructure pricing power.
"The regulatory moat around ET/ENB is not invincible; long-term contracts help, but volume risk and potential regulatory pushes can cap pricing power in a weak oil environment."
Gemini's regulatory moat claim is overdone. Yes, pipelines have entry barriers, but ET/ENB cashflows ride on long-term take-or-pay contracts and rate cases; those mechanics also cap upside and expose distributions to volume risk if upstream capex slows. If Brent stays sub-$80, regulators and customers may push against tolls, and replacement-capital costs alone can't guarantee pricing power. The moat is real but not invincible, especially in a soft oil regime.
The panelists generally agreed that while midstream companies like ET and ENB have defensive qualities due to their toll-like cash flows and regulatory barriers, they are not entirely immune to risks such as volume reductions, contract renegotiations, and regulatory pushback in a low-price oil environment. Chevron's high EPS growth projections were met with skepticism due to potential execution risks and energy transition headwinds.
Regulatory barriers providing a floor on valuation for ENB and ET
Volume reductions and contract renegotiations due to prolonged low-price oil environment