The ongoing success of upstream companies continues to drive additional investments in the midstream sector, a trend which is expected to continue for the foreseeable future, a panel of experts concluded recently.

Midstream assets remain an active target for acquisitions. A total of eight acquisitions were announced for an excess of $8 billion after March 15. In the same timeframe, publicly traded midstream companies made a total of six secondary public-equity offerings for a total of $2.7 billion. Meanwhile, midstream companies made three separate debt offerings which totaled nearly $755 million.

One of the largest asset-sale announcements came from Kinder Morgan Inc., which announced it would sell 7,200 miles of pipelines in the U.S. Rocky Mountains to get approval for its $23.8 billion acquisition of El Paso Corp. The deal was estimated to be about $3 billion, but no specific buyer was announced. The deal is expected to close in May.

Meanwhile, Williams Partners LP agreed to buy Caiman Eastern Midstream LLC, a subsidiary of Caiman Energy LP, for $2.5 billion. Williams Partners announced it will pay for the transaction with about $1.78 billion in cash and the issuance of 11.8 million ownership units worth $720 billion. The deal underscored the importance of the growing output from the Marcellus shale and the need for midstream infrastructure to move that oil and gas production to market.

Many market analysts believed that multi-billion dollar deals like the two above will continue as long as production from the region continues to grow. Speaking at Hart Energy's recent Marcellus Midstream Conference & Exhibition held in Pittsburgh, Pennsylvania, a panel of financial presenters agreed that the rush into the sector would continue to fuel mergers and acquisitions for years to come.

Kenny Feng, president and chief executive of Alerian, said the midstream sector has been popular with investors during the past three years for at least two reasons. First, master limited partnerships, (MLPs) have delivered an average of 18% annual returns over the past decade. In addition, MLPs offer the best yield relative to other alternatives available to investors. 10-year U.S. Treasury notes, real estate investment trusts, and other high yield alternatives are not as attractive at the moment.

"People are looking for different sources of income and obviously MLPs have become a very attractive opportunity in that regard," he said.

Bill Waldrip, managing partner of EnCap Flatrock Midstream, said the Marcellus sector has seen strong growth, but there is additional growth yet to come. "We still believe we are on the front end of that curve," he said.

Waldrip estimated that U.S. upstream investment is expected to be about $125 billion per year in 2012, with midstream investments typically accounting for $0.15 to $0.35 per upstream dollar. Based on those rules of thumb, U.S. midstream companies will likely need about $30 billion this year for capital investments.

The current climate is a unique period of the midstream sector, driven largely by success in the upstream sector, but "the party is not yet over," Waldrip says. "We think it will take a lot of capital from many sources to continue the current pace of development of our business. We're in the first innings of a multi-decade buildout of our space," he said.