OREANDA-NEWS. Disruption in the hydrocarbon markets has not interrupted midstream energy companies' ability to access the capital markets, according to Fitch Ratings.

The energy sector suffered from the dramatic declines in hydrocarbon prices -- about 50% for oil prices and about 33% for natural gas prices -- since June 2014, leading to significant declines in profitability and credit quality for many upstream names. But while midstream energy companies' stocks have underperformed in the broader market, uncertainty around commodity prices could have then translated into increased difficulty raising capital in the current market. That simply has not been the case, as access for midstreams remains strong.

We compared capital-raising transactions in the North American midstream energy sector for the year-to-date period through March 27, 2015 with first-quarter 2014, and we found that the 2015 period included seven more transactions (45), and a 36.9% higher dollar volume of capital raised (over \$29 billion). In both periods, common equity raised was nearly identical at \$3.4 billion. Bond offerings were substantially higher in 2015, raising \$21.8 billion versus \$16.7 billion in the comparable period last year.

Oil and gas prices opened in first-quarter 2014 at \$98.42/barrel (bbl) and \$4.23/thousand cubic feet (mcf) and closed in first-quarter 2014 at \$101.58/bbl and \$4.37/mcf, respectively. The comparable quotes for first-quarter 2015 were \$53.27 and \$2.89 for the open and \$48.65 and \$2.59 for the close, respectively.

While interest rates were notably higher in the earlier period with 10-year and 30-year Treasurys yielding 2.88% and 3.76% on average, respectively, compared with average yields of 2.06% and 2.64%, respectively, this year, the U.S. corporate 10-year 'BBB' index credit spread indicates that spreads were tighter last year averaging 152.5 bps compared with an average of 166 bps for the first quarter of 2015.

In the past 12 months, the energy industry's fundamentals have been significantly impaired by hydrocarbon price declines. However, midstream energy companies continue to raise capital in the normal course of their business. While an inability to raise capital would be devastating to any master limited partnership, recent experience gives support to the increasing improbability of such an incidence. Fitch believes the North American midstream universe will continue to benefit from open capital markets barring a more pervasive macroeconomic event.