For the longest time, it was the golden shale area of the United States. The Permian Basin in West Texas has delivered unprecedented production growth for domestic exploration and production companies, but it’s looking now that a great deal of Permian production could be constrained through 2020, a situation that one firm feels could cause some upstream companies misery, but for midstream companies, it could be an opportunity.

In a new research report, the MLP team at Baird has assimilated the data from the recent Plains All American Pipeline L.P. (NYSE: PAA) analysts day and come to some interesting conclusions. The report noted this:

Plains anticipates shut-in and/or foregone production growth in the Permian Basin to persist through 2020. If accurate, unhedged E&P realizations could remain challenged. With drilled but uncompleted wells expanding and productivity continuing to improve, in turn we expect continued advancement in Permian Basin supply elasticity. That is, expect new pipeline export capacity to be filled rapidly.

The analysts feel that some top midstream companies will benefit from this situation, and they listed those with that potential. We cross-referenced them against the master limited partnerships rated Outperform at Baird and found four that look like solid values now.

Energy Transfer Equity

This MLP brings the potential for solid growth and income. Energy Transfer Equity LP (NYSE: ETE) owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners and Sunoco. The company also owns Lake Charles LNG. On a consolidated basis, the family of companies owns and operates a diverse portfolio of natural gas, natural gas liquids (NGLs), crude oil and refined products assets, as well as retail and wholesale motor fuel operations and liquefied natural gas terminaling.

The underlying Energy Transfer partnerships are levered broadly across key growth areas of the Permian for liquids and Marcellus/Utica natural gas. Following the simplification transaction with Sunoco Logistics Partners, top analysts are modeled a double-digit three-year distribution growth compounded annual growth rate at Energy Transfer Partners, directly benefiting the company via the IDR structure.

Investors receive a 6.94% distribution. The Baird price target for the shares is $19, and the Wall Street consensus target is $20. Shares traded Thursday morning at $17.60.

Energy Transfer Partners

This company merged with Sunoco Logistics Partners last year. Energy Transfer Partners L.P. (NYSE: ETP) engages in the natural gas midstream and intrastate transportation and storage businesses in the United States.

The company’s Intrastate Transportation and Storage segment transports natural gas from various natural gas producing areas, and through ET fuel system and HPL system. It owns and operates 7,500 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas. Its Interstate Transportation and Storage segment provides natural gas transportation and storage services; owns and operates approximately 12,300 miles of interstate natural gas pipeline; and has interests in various natural gas pipelines.

The Midstream segment gathers, compresses, treats, blends, processes and markets natural gas. It owns and operates 35,000 miles of in service natural gas, 31 natural gas processing plants, 21 natural gas treating facilities and four natural gas conditioning facilities.

Unitholders receive an 11.68% distribution. Baird has a $23 price target, and the consensus target is $23.95. The shares traded at $19.25 early Thursday.

Noble Midstream Partners

This newer company came public in September 2016. Noble Midstream Partners L.P. (NYSE: NBLX) primarily provides natural gas gathering, processing and water services in Colorado and Texas.

The company was formed by the owner of its general partner, Noble Energy, as an investment grade rated worldwide producer of crude oil and natural gas. Noble Midstream has significant acreage dedications from Noble Energy. The company owns equity interests in six operating subsidiaries and a 3.33% interest in the White Cliffs crude oil pipeline system.

The company recently announced that it received producer activity set and development plan for approximately 13,000 acres dedicated to Noble Midstream in Reeves County for oil, gas and produced water gathering services from a third party. Services will be provided through the Blanco River development company and are expected to commence by the end of 2018.

Investors receive a 3.83% distribution. The $64 Baird price target compares with the $60.80 consensus target. The stock was last seen trading at $53.20.

Targa Resources

This top energy MLP has had a string of positives lately. Targa Resources Corp (NYSE: TRGP) is a leading provider of midstream services and is one of the largest independent midstream energy companies in North America. Targa owns, operates, acquires and develops a diversified portfolio of complementary midstream energy assets.

The company is primarily engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling NGLs and NGL products, including services to liquefied petroleum gas exporters; gathering, storing and terminaling crude oil; storing, terminaling and selling refined petroleum products.

Targa Resources has one of the premier asset positions in the Permian basin. With solid management, a strong balance sheet and attractive exposure to some of the most attractive U.S. energy basins, it remains a top pick for 2018 at Baird and across Wall Street.

Investors receive a 7.47% distribution. The Baird price objective is $59. The consensus estimate is $53.65, and shares traded at $49.25.

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While the issues in the Permian Basin will not last forever, it makes sense to put some capital behind the companies that look poised to benefit now. Given that MLPs have been somewhat out of favor recently due to some regulatory changes, the entry point for all these stocks is favorable.

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