FERC Ruling
FERC Ruling
Dan, the MLPs are all falling out of bed following the recent FERC tax ruling. Obviously this is not good. But do you think the market is overreacting?
Re: FERC Ruling
Absolutely an overreaction. Great day to buy. The FERC decision involves just one of three rate methods they use, and it corrects a double dipping with regards to taxes. Does not apply to intrastate, G&P or non pipeline MLPs. And most oil pipelines use a completely different method of establishing rates. I doubt it will have any material impact on rates pipelines can charge. But, I could be wrong.
Re: FERC Ruling
Midstream companies such as Kinder Morgan (KMI), Targa Resource (TRGP), and ONEOK (OKE) are taxed as C-corps, so the revised policy doesn’t apply to them. C-corps reacted negatively to the news, but they recovered by the end of the trading session. Williams Companies (WMB) and Enbridge Inc. (ENB), which are also C-corps, were an exception due to their GP-LP model and dependence on limited partnerships for their distribution income.
Non-regulated pipelines
Non-regulated pipelines—such as gathering pipelines and other intrastate pipelines—aren’t regulated by FERC, so they wouldn’t see much impact from the revised tax policy. The gathering MLPs include Antero Midstream Partners (AM), Cone Midstream Partners (CNNX), and EQT Midstream Partners (EQM).
Other midstream activities
Other midstream activities—such as natural gas processing, NGLs fractionation, and fuel terminaling and storage—shouldn’t have any impact on the revised policy, as prices in these cases aren’t regulated by FERC. They include MPLX LP (MPLX), Western Gas Partners (WES), and DCP Midstream (DCP).
However, most midstream MLPs have some exposure to interstate transportation and the sell-off across the sector.
Other value chain
MLPs that aren’t involved in midstream activities—such as upstream MLPs, downstream MLPs, frac-sand producers, catalytic conversion, and midstream services—should see no impact from the revised policy. They include Legacy Reserves (LGCY), Hi-Crush Partners (HCLP), CSI Compressco LP (CCLP), and CVR Refining (CVRR).
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Time to load up on HCLP.
Non-regulated pipelines
Non-regulated pipelines—such as gathering pipelines and other intrastate pipelines—aren’t regulated by FERC, so they wouldn’t see much impact from the revised tax policy. The gathering MLPs include Antero Midstream Partners (AM), Cone Midstream Partners (CNNX), and EQT Midstream Partners (EQM).
Other midstream activities
Other midstream activities—such as natural gas processing, NGLs fractionation, and fuel terminaling and storage—shouldn’t have any impact on the revised policy, as prices in these cases aren’t regulated by FERC. They include MPLX LP (MPLX), Western Gas Partners (WES), and DCP Midstream (DCP).
However, most midstream MLPs have some exposure to interstate transportation and the sell-off across the sector.
Other value chain
MLPs that aren’t involved in midstream activities—such as upstream MLPs, downstream MLPs, frac-sand producers, catalytic conversion, and midstream services—should see no impact from the revised policy. They include Legacy Reserves (LGCY), Hi-Crush Partners (HCLP), CSI Compressco LP (CCLP), and CVR Refining (CVRR).
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Time to load up on HCLP.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: FERC Ruling
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group