Reviewing Hess Midstream Partners (HESM) and Kimbell Royalty Partners (KRP)

Hess Midstream Partners (NYSE: HESM) and Kimbell Royalty Partners (NYSE:KRP) are both small-cap oils/energy companies, but which is the better business? We will compare the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, earnings, institutional ownership and risk.

Dividends

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Hess Midstream Partners pays an annual dividend of $1.29 per share and has a dividend yield of 6.7%. Kimbell Royalty Partners pays an annual dividend of $1.44 per share and has a dividend yield of 7.6%. Kimbell Royalty Partners pays out 1,107.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a breakdown of recent ratings for Hess Midstream Partners and Kimbell Royalty Partners, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hess Midstream Partners 0 0 6 0 3.00
Kimbell Royalty Partners 0 1 3 0 2.75

Hess Midstream Partners presently has a consensus target price of $28.33, indicating a potential upside of 47.72%. Kimbell Royalty Partners has a consensus target price of $20.00, indicating a potential upside of 5.82%. Given Hess Midstream Partners’ stronger consensus rating and higher possible upside, analysts clearly believe Hess Midstream Partners is more favorable than Kimbell Royalty Partners.

Valuation and Earnings

This table compares Hess Midstream Partners and Kimbell Royalty Partners’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hess Midstream Partners $565.80 million 0.92 $284.80 million N/A N/A
Kimbell Royalty Partners $30.97 million 10.08 $1.21 million $0.13 145.38

Hess Midstream Partners has higher revenue and earnings than Kimbell Royalty Partners.

Profitability

This table compares Hess Midstream Partners and Kimbell Royalty Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hess Midstream Partners 18.29% 4.16% 3.96%
Kimbell Royalty Partners 3.99% 0.46% 0.42%

Institutional and Insider Ownership

56.5% of Hess Midstream Partners shares are owned by institutional investors. Comparatively, 28.4% of Kimbell Royalty Partners shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

Hess Midstream Partners beats Kimbell Royalty Partners on 10 of the 12 factors compared between the two stocks.

Hess Midstream Partners Company Profile

Hess Midstream Partners LP is a fee-based, traditional master limited partnership formed to own, operate, develop and acquire a set of midstream assets to provide services to Hess and third-party crude oil and natural gas producers. The Company’s assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota (collectively referred as the Bakken). It operates its business through three segments: gathering; processing and storage; and terminaling and export. The Company’s gathering business consisted of its 20% controlling economic interest in Gathering Opco, which owns North Dakota natural gas, natural gas liquids and crude oil gathering systems. The Company’s processing and storage business consisted of its 20% controlling economic interest in the Tioga Gas Plant and its 100% interest in the Mentor Storage Terminal. The Company’s terminaling and export business consisted of its 20% controlling economic interest in Logistics Opco.

Kimbell Royalty Partners Company Profile

Kimbell Royalty Partners, LP owns and acquires mineral and royalty interests in oil and natural gas properties throughout the United States. As of December 31, 2015, the Company owned mineral and royalty interests in approximately 3.7 million gross acres and overriding royalty interests in approximately 0.9 million gross acres, with approximately 44% of its acres located in the Permian Basin. As of December 31, 2015, the Company’s mineral and royalty interests were located in 20 states and in every onshore basin across the continental United States, and included ownership in over 48,000 gross producing wells, including over 29,000 wells in the Permian Basin. The Company’s properties include Permian Basin, Mid-Continent, Terryville/Cotton Valley/Haynesville, Eagle Ford, Barnett Shale/Fort Worth Basin, Bakken/Williston Basin, San Juan Basin, Onshore California, DJ Basin/Rockies/Niobrara, Illinois Basin and others.

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