Brad Quick | CNBC

Pipeline and energy infrastructure companies face operational challenges in the coming years even as U.S. oil drilling recovers and a natural gas export boom gets underway, consulting firm Bain & Co. says in a new report. While there is demand for new infrastructure, three trends in the industry could trip up pipeline companies, Bain said in a report released Wednesday. Oil and gas drilling is subdued in some areas, contract renewals may lead to lower rates, and private equity competition is eating into profit margins. This will make it harder for so-called midstream companies, which transport, store and process oil and gas, to squeeze profit out of their projects, according to Bain. This matters to investors because investing in midstream companies became a source of reliable dividends as pipeline construction ramped up during the U.S. shale oil and gas boom. Pipelines and other infrastructure produce steady income, allowing midstream companies to ratchet up payouts to investors. The 10-year average annual distribution growth for master limited partnerships, a common structure for energy infrastructure companies, was 6.8 percent through 2015, according to Alerian, which operates funds linked to MLPs. Alerian MLP Index distribution growth "There's a starvation for yield right now because the 10-year [U.S. Treasury] is barely over 2 [percent]. Utility and REIT yields are really, really low. You can go buy energy infrastructure stocks that have 5.5, 6.5 percent yields that are growing," Rob Thummel, portfolio manager at Tortoise Capital, told CNBC's "Power Lunch" on Tuesday.

Stranded assets

Oil and gas from some regions that would have moved through pipes are now stranded in the ground because they're too expensive to extract, pipeline executives told Bain. Some low-cost regions like Texas' Permian basin have rebounded quickly. But sharp production declines in other basins, like North Dakota's Bakken, have not yet reversed significantly. The focus on sweet spots could reduce production in places like the Rockies, lowering the need for pipelines and other infrastructure.

Portfolio managers say they're keenly focused on this issue. "It's kind of like real estate. It's all about location, location, location when investing in some of these MLPs," Thummel told CNBC in a separate interview Wednesday. "The way we mitigate that is making sure our companies have diversified assets. You've got to be careful investing in just concentrated positions in concentrated areas," he added. Two of Thummel's top diversified picks are Enterprise Products Partners and EQT Midstream Partners, which yield 6.7 percent and 5.1 percent, respectively.

Tougher contracts

Another worry that Bain flags is the coming expiration of favorable contracts that pipeline companies signed with their customers during a construction boom. Contract provisions that guaranteed a minimum payment no matter how much product flowed through their lines have protected their revenue. Pipeline operators will likely have to agree to lower volumes and rates when they negotiate new contracts, Bain says. That's a problem, especially for companies that pipe oil and gas out of basins where production is falling, according to Bain. While this midstream sector hasn't entirely resolved this issue, concerns about contracts have already been priced into midstream stocks and MLP units, said Jay Hatfield, a portfolio manager for InfraCap's AMZA exchange-traded fund, which tracks midstream companies. He notes that companies began tackling the issue over the last two to three years, altering the terms of contracts when those terms became uneconomical due to low oil and gas prices. "It's good for everyone because transport companies can invest more in pipelines and gathering and processing, and probably more gas is going to flow," Hatfield said. MLPs are now one of the cheapest assets classes in the yield sector, according to Hatfield.

Private equity problems