In a recently released analysis, Deloitte provides an upbeat summary of the high growth occurring in infrastructure projects needed to support the hydraulic fracturing and horizontal drilling – or "fracking" – boom across the country. A sector once considered mature and slow-growth has instead seen new demand for expansion in pipeline, processing, storage, and transport capacity. Deloitte predicts that new investment on the order of $200 billion will be needed by 2035, and that investors will be well-rewarded, given that average profit margins are three times greater than interest expense, partly due to use of Master Limited Partnerships. Noting the strong growth potential in a market with these opportunities, the report nonetheless cautions that small and medium-sized companies will face challenges compared to larger enterprises in terms of access to financing, ability to cover the breadth of the value chain, and competitiveness in new and emerging shale plays. These realities will favor midstream majors for the most significant gains, but will still leave room for niche opportunities for innovative, nimble smaller companies.
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