After almost two years of a downward spiral in oil prices, and a commensurate fall in the prices of energy master limited partnerships (MLPs), one would certainly think that the sector would be cheap, especially when compared the Dow Jones Utility Index, which has been hitting all-time highs. A new and very extensive research report from John Edwards and his team at Credit Suisse makes the case that sector is actually slightly expensive now to utilities.

The Credit Suisse analysts note that once again enterprise value to EBITDA showing relative indifference to distribution policy is being resurrected as a way to look at the sector. They also cite stronger distribution coverage and what they term as “thicker equity coverage” as keys to surviving wicked cyclical downturns, especially given the sector’s strong correlation to oil pricing.

Three companies are touted at the top picks at the firm, and all are rated Overweight. They are cited for their defensive characteristics, and ability to have offensive qualities should oil stay in the $30s.

EQT Midstream Partners

This company comes in as a top midstream play at Credit Suisse. EQT Midstream Partners L.P. (NYSE: EQM) is a growth-oriented partnership formed by EQT Corporation to own, operate, acquire and develop midstream assets in the Appalachian Basin. The partnership provides midstream services to EQT and third-party companies through its strategically located transmission, storage and gathering systems that service the Marcellus and Utica regions. The partnership also owns 700 miles and operates an additional 200 miles of FERC-regulated interstate pipelines. It it also owns more than 1,600 miles of high- and low-pressure gathering lines.

The stock had a secondary offering late last year that some thought was ill-timed and dilutive, especially since the stock was down about 15% at the time. The bottom line is they were able to go to the capital markets for additional funding and should be set for the foreseeable future. The stock also has rallied smartly since the lows printed in December and again in January.

EQT Midstream investors are paid a 3.75% distribution. The Credit Suisse price target for the stock is $109. The Thomson/First Call consensus price target is lower at $90.82. The stock closed Thursday at $75.78 per share.

Genesis Energy

This is another top company that has fought its way through the sector troubles. Genesis Energy L.P. (NYSE: GEL) operates in the midstream segment of the oil and gas industry in the Gulf Coast region of the United States. Its Onshore Pipeline Transportation segment transports crude oil and carbon dioxide (CO2).

This segment owns four onshore crude oil pipeline systems with approximately 500 miles of pipe located primarily in Alabama, Florida, Louisiana, Mississippi and Texas, as well as CO2 pipelines with approximately 270 miles of pipe. The company’s Offshore Pipeline Transportation segment transports crude oil, and owns various offshore crude oil pipeline systems with approximately 1,200 miles of pipe located offshore in the Gulf of Mexico.
The company’s Refinery Services segment processes high sulfur gas streams to remove sulfur for refineries. This segment provides services to 10 refining operations located primarily in Texas, Louisiana, Arkansas, Oklahoma and Utah, and it sells the by-product sodium hydrosulfide and caustic soda to industrial and commercial companies involved in the mining of copper, molybdenum and other base metals, as well as in the production of pulp and paper.

Lastly, the company’s Marine Transportation segment offers waterborne transportation of petroleum products and crude oil in North America. This segment owns fleet of 71 barges with a combined transportation capacity of 2.6 million barrels, and 33 push/tow boats. Its Supply and Logistics segment provides services primarily to Gulf Coast oil and gas producers and refineries through a combination of purchasing, transporting, storing, blending and marketing of crude oil and refined products, such as fuel oil, asphalt and other heavy refined products. This segment operates a suite of approximately 300 trucks, 400 trailers, 562 rail cars and terminals and tankage with 2.9 million barrels of storage capacity in various locations along the Gulf Coast.

Genesis shareholders are paid an outstanding 8% distribution. The Credit Suisse price target is set at $46, and the consensus price objective is lower at $38.17. The shares closed Thursday at $32.77, up 7.44% on the day.

Tallgrass Energy Partners

This rounds out the top three picks at Credit Suisse and also offers investors a solid and well-covered distribution. Tallgrass Energy Partners L.P. (NYSE: TEP) provides crude oil transportation to customers in Wyoming, Colorado and the surrounding regions through Pony Express, which owns the Pony Express System, a crude oil pipeline commencing in Guernsey, Wyo., and terminating in Cushing, Okla., that includes a lateral in northeast Colorado that commences in Weld County, Colo., and interconnects with the pipeline just east of Sterling, Colo.

In addition, the company provides natural gas transportation and storage services for customers in the Rocky Mountain and Midwest regions of the United States through the Tallgrass Interstate Gas Transmission system, a FERC-regulated natural gas transportation and storage system located in Colorado, Kansas, Missouri, Nebraska and Wyoming, and the Trailblazer Pipeline system, a FERC-regulated natural gas pipeline system extending from the Colorado and Wyoming border to Beatrice, Neb.

Investors are paid a 6.54% distribution. Credit Suisse has a $54 price target, and the consensus stands at $45.77. The shares closed most recently at $39.15.

All three of these top picks make good sense for investors looking to play a second half 2016 and 2017 sector rebound. Should oil languish in the recent trading range, they should still offer stability. It is important to remember that MLP distributions may contain return of capital.

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