Blackstone (BX) Investing $2 Billion Into Cheniere Energy Partners (CPQ) To Assist In LNG Exports Due To U.S. Oversupply; Exclusive Interview With Mr. Ethan Bellamy - Robert W. Baird And Co.

April 11, 2012

67 WALL STREET, New York - April 11, 2012 - The Wall Street Transcript has just published its Oil & Gas: Master Limited Partnerships Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Oil and Gas Transportation Infrastructure Demand - Master Limited Partnerships Distribution Growth - Outlook for Natural Gas Liquids - Low Treasury Yields and MLP Dividends

Companies include: Inergy L.P. (NRGY); Sunoco Logistics (SXL); Anadarko (APC); BP (BP); Blackstone (BX); and many more.

In the following brief excerpt from the Oil And Gas Special Report, expert analystst discuss the outlook for the sector and for investors.

Ethan Bellamy is a Senior Research Analyst at Robert W. Baird & Co. covering energy equity income securities and U.S. royalty trusts. Before joining Baird in 2010, he was a sell-side Analyst at Wunderlich Securities. Previously, he was the Director of Research for the Lehman Brothers MLP Opportunity Fund, a Senior Analyst covering MLPs at Stifel Nicolaus & Co., Inc., and a Writing Instructor at the University of Colorado. Mr. Bellamy received a B.A. from Clemson University, an M.A. from the University of Colorado Boulder, and was most recently a Doctoral Student focusing on energy policy at the University of Colorado Denver, with a focus on energy infrastructure. Mr. Bellamy was the number two stock picker in the U.S., and the number one stock picker in the U.S. oil and gas sector in the 2010 and 2009 Financial Times/StarMine polls, respectively.

TWST: Please start with an overview of your coverage universe.

Mr. Bellamy: We have 22 names under coverage. What's changed since we last spoke is that I have expanded our coverage in the royalty trust sector, and we've dropped coverage of the MLP closed-end funds in order to focus more directly on the MLP space. That's really just to manage bandwidth, not for any major change that has gone on with the closed-end funds. We have, as a percentage of the instruments that are outstanding, most of the upstream MLPs covered - that is, the MLPs that produce oil and gas. And then we have select small- and mid-cap midstream names under coverage. These are the transportation providers, gatherers and processors of oil and gas. And then, we have royalty trusts under coverage. We have five right now. Most of these are the new vintage trusts that have recently gone public, and these royalty trusts, I think, are an important component of the broader energy landscape right now.

TWST: You mentioned we may see LNG exports. How far in the future is that?

Mr. Bellamy: The first likely candidates for that is Cheniere Energy (LNG). What's interesting about Cheniere is it started out as an LNG import company, but as the supply situation in the United States changed with unconventional resources, tight resources - we've got this oversupply situation now - they actually have decided to go the other way and serve as an exporter of LNG. The thing that has occurred lately that is of most interest and most likely to, I think, take that project to fruition is that on February 27, Blackstone (BX) announced that it was going to invest $2 billion into Cheniere Energy Partners (CQP) in order to facilitate the construction of the liquefaction train on the Gulf Coast at Sabine Pass.

The first two trains are expected to be $4.5 billion to $5 billion, so they've got a significant sum of capital behind them from a premier financier. And so I think it's likely, both from a regulatory and from a financing perspective, that that project gets done. Now the problem with megaprojects like this is that they take time to complete. They're going to start that construction project now, but gas prices could be significantly different by the time they're done. I think that the economics will be substantial enough for them to export gas profitably to Europe, for example, but that's a lot of risk. The supply situation, as we've seen in the last five years, can change pretty drastically over the course of two or three years.

TWST: Are there any other companies that stand to benefit from exporting?

Mr. Bellamy: I would say it's really the domain of the supermajors. Globally, it takes a lot of capital to put in the ground and to construct these terminals, particularly on the liquefaction side, which is more capital intensive. So I think it's going to be mostly the domain of the supermajors, and Cheniere is the only direct participant in the MLP sector, with the exception of - let's call them quasi-MLPs, because they're offshore, they're not technically MLP, but they are generally grouped in with the sector - like Teekay LNG (TGP). You can see that stock has done extremely well, because LNG shipping, I think, is a pretty compelling business to be in given the number of projects globally and the fact that we still see some pretty big price disparities globally between areas of supply and areas of demand, particularly Europe and Japan. After the tsunami and the nuclear accident in Japan, their LNG consumption is going to go up substantially.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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