GivenNoble Midstream Partners LP'ssupportive sponsor and its path toward new volumes and increased distributions,Mizuho Securities USA Inc. initiated coverage of the partnership with a "buy"rating on Oct. 10.

Mizuho'sBrian Zarahn highlighted Noble Midstream's attractive position underinvestment-grade driller NobleEnergy Inc. in the DJ and Permian Basins as reasons for his bullishoutlook, and forecast compound annual distribution growth of 20% from 2017through 2020. Zarahn estimated a 3-year compound annual growth rate in AdjustedEBITDA of 48% and a 3-year CAGR in distributable cash flow of 42%. He expectsthe master limited partnership's coverage ratio to reach a four-year peak of1.59x in 2019.

"Ourestimates … are supported by organic projects and asset drop-downs from parent[Noble Energy]," Zarahn said in an Oct. 10 note, pointing to $500 millionof midstream capital expenditures earmarked over the next five years, and $960million of drop-downs to the partnership from Noble Energy from 2017 through2020. The $500 million investment aims to support Noble Energy's drillingprogram.

"Webelieve [Noble Midstream] has upside potential from higher-than-expected drillingactivity in the DJ Basin and additional third-party customers if crude oilfundamentals continue to improve," the analyst wrote.

About88% of Noble Midstream's 340,000 of net acreage dedications are in the DJBasin, while 12% lies in the Delaware Basin. Zarahn believes that thepartnership will see future growth in the Delaware Basin as Noble Energy rampsup drilling in Texas.

"Weexpect organic gathered volumes in [Noble Midstream's] acreage to grow at ~38%CAGR from 2017-2021," his report said.

TheMLP, after postponingits IPO in November 2015, tookthe plunge in September with an offering at $22.50 per unit. It was the firstMLP to go public after more than a year of zero midstream IPO activity, and its shares by more than 16% onSept. 15, its first day on the NYSE.