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After Q2 rebound, midstream stocks saw slower gains in Q3

Aftera robust second-quarter stock price rally, many midstream companies extendedtheir gains at a modest pace in the third quarter.

Stockin six of the 10 largest midstream operators appreciated quarter over quarterand the SNL Midstream Energy index climbed nearly 6% for the quarter, comparedto a nearly 19% gain for the second quarter. The strong recent performancecontrasts with the start of 2016 when the index fell about 4% for the firstquarter.

emerged asthe top stock performer with a 42% jump in its value after its nixed mergerwith Energy Transfer Equity LP.Thecompany has initiated a series of moves to strengthen its balance sheet and itsboard, which has impressed investors following the ugly break-up with EnergyTransfer.

RobThummel, managing director of Tortoise Capital Advisors LLC, which is one ofWilliams' investors, said that the natural gas giant likely benefited the mostfrom Enbridge Inc.'spost-Labor Day announcementof a merger with Spectra EnergyCorp.

"TheSpectra transaction really demonstrated the value associated with northeastnatural gas infrastructure, and Williams has significant exposure to that.Williams is probably second to Spectra in terms of that exposure. So, Spectrabeing purchased … really boosted their prices," he said in an interview.

Williams'board refreshmentalso played a part in pulling the company to the winner's slot, Thummel added.

rankedsecond with a 24% jump in its shares while Kinder Morgan Inc. and came in third and fourth,both gaining more than 20% in value.

closed the half on a high note after news of Rice Energy Inc. $2.7 billion with . Rice said it willdrop $600 million worth of midstream assets to the partnership and dedicate itsfuture production as well.

Sharesof Spectra Energy jumped by 16.7% in the third quarter, surging after Enbridgesaid it would buy themidstream company in early September.

Midstreamcompanies bottomed in February in tandem with oil and gas prices. But the linkbetween midstream stocks and oil prices has lessened, which is attracting a newwave of investors, according to Jeremy Held, research director at ALPS AdvisorsInc.

"We'renot seeing daily shifts where MLPs and crude prices are attached at the hip,"Held said. "The correlation between MLPs and 10-year crude, prior to thedrop in crude prices, was about 0.4. For the better part of 2015 [till March2016], that correlation almost doubled to 0.7. In December, January andFebruary, they were both moving in the same direction every day. Since April,that correlation is 0.35."

fell tothe bottom of the heap with a 37% plunge in its shares. In late September,investors off-loaded Ferrellgas units in haste after an impairment chargerelated to its midstream assets inflated its fourth quarter net loss, earningit a downgrade fromS&P Global Ratings.

S&P Global Ratingsand S&P Global Market Intelligence are owned by S&P Global Inc.