Midstream MLPs for High Yield
Posted: Wed Apr 13, 2016 10:47 am
Stifel sent out a report this morning focused on midstream MLPs. Below are highlights. If you'd like to read the full report send me an e-mail ( dmsteffens@comcast.net ). - Dan
Top Picks
Buckeye Partners (BPL, $68.48, Buy), Enterprise Products Partners (EPD, $25.01, Buy), Magellan Midstream Partners
(MMP, $68.17, Buy), Rice Midstream Partners (RMP, $15.19, Buy) and TransMontaigne Partners (TLP, $39.41, Buy).
As we head into the first quarter we want to highlight our top picks, which include Buckeye Partners (BPL),
Enterprise Products (EPD), Magellan Midstream Partners (MMP), Rice Midstream Partners (RMP) and
TransMontaigne Partners (TLP). There are several themes which tie these names together as our top
picks. First and foremost we see them being closer to demand centers as opposed to producers. The majority
of names listed have exposure to refined products and we view the chemical crackers served by EPD as
another form of demand center, just not a retail customer. In addition, our top picks have a significant amount
of assets secured by fee-based, take-or-pay contracts whether this be above-ground storage in the form of
terminals or underground at Mont Belvieu. Next they all have access to the water and we believe exports will
be a growing part of the US energy story as it continues to evolve, especially with the lifting of the crude export
ban. Finally, a majority of our top picks have no economic general partner with incentive distribution
rights. Among the Northeast focused partnerships, we highlight Rice Midstream for its fee-based contract
structure, which along with the projected growth of production volumes from Rice Energy provides the capacity
to grow the distribution 20%. While right now everything is correlated with oil, we believe these names have
less commodity exposure and better balance sheets (reasonable leverage and no near-term maturities) and
distribution coverage ratios above 1.0x where investors can confidently ride out the storm of declining US
production and volatile commodity prices.
Top Picks
Buckeye Partners (BPL, $68.48, Buy), Enterprise Products Partners (EPD, $25.01, Buy), Magellan Midstream Partners
(MMP, $68.17, Buy), Rice Midstream Partners (RMP, $15.19, Buy) and TransMontaigne Partners (TLP, $39.41, Buy).
As we head into the first quarter we want to highlight our top picks, which include Buckeye Partners (BPL),
Enterprise Products (EPD), Magellan Midstream Partners (MMP), Rice Midstream Partners (RMP) and
TransMontaigne Partners (TLP). There are several themes which tie these names together as our top
picks. First and foremost we see them being closer to demand centers as opposed to producers. The majority
of names listed have exposure to refined products and we view the chemical crackers served by EPD as
another form of demand center, just not a retail customer. In addition, our top picks have a significant amount
of assets secured by fee-based, take-or-pay contracts whether this be above-ground storage in the form of
terminals or underground at Mont Belvieu. Next they all have access to the water and we believe exports will
be a growing part of the US energy story as it continues to evolve, especially with the lifting of the crude export
ban. Finally, a majority of our top picks have no economic general partner with incentive distribution
rights. Among the Northeast focused partnerships, we highlight Rice Midstream for its fee-based contract
structure, which along with the projected growth of production volumes from Rice Energy provides the capacity
to grow the distribution 20%. While right now everything is correlated with oil, we believe these names have
less commodity exposure and better balance sheets (reasonable leverage and no near-term maturities) and
distribution coverage ratios above 1.0x where investors can confidently ride out the storm of declining US
production and volatile commodity prices.