Significant Yield Component, Backdrop for Acquisition Opportunities in the Upstream MLP Universe

Wall Street Transcript

67 WALL STREET, New York - March 21, 2013 - 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 and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Increasing Demand for Midstream Assets - U.S. Energy Infrastructure Build Out - Emerging Shale Plays - Oil and Gas Transportation Infrastructure Demand - Master Limited Partnerships Distribution Growth - Outlook for Natural Gas Liquids - Low Treasury Yields and MLP Dividends

Companies include: El Paso Pipeline Partners, L.P (EPB), Copano Energy LLC (CPNO), Williams Companies, Inc. (WMB), Linn Energy, LLC (LINE), Berry Petroleum Co. (BRY), Vanguard Natural Resources, LL (VNR), Legacy Reserves Lp (LGCY), ONEOK Inc. (OKE), Williams Partners L.P. (WPZ), ONEOK Partners, L.P. (OKS), AmeriGas Partners LP (APU), Spectra Energy Partners, LP (SEP) and many more.

In the following excerpt from the Oil & Gas: Master Limited Partnerships Report, an expert analyst discusses the outlook for the sector for investors:

TWST: What are your favorite names among the MLPs in your coverage universe?

Mr. Sighinolfi: We continue to like some of the names in the upstream world; Legacy Reserves, LINN Energy are two. Mainly that has to do with the fact that the yield component you get in the upstream world is significant relative to other areas of the MLP space.

Legacy offers an 8.7% current distribution yield; LINN is at about 7.7%. So a significant current income, and then, as I mentioned before, we are seeing a very nice backdrop for acquisition opportunities, given cash flow pressures at independent E&P companies and a desire to use asset sales as a means of closing cash flow deficits. And given the disparity in where these companies trade versus where they are able to buy assets, it's a very nice accretive opportunity set for them.

We still have contango natural gas futures curves, so we are able to hedge 2018 gas right now at close to $5/MMBtu, and LINN has been doing that, so all around we like the upstream MLP universe in a general sense.

We have actually downgraded a number of names to "neutral" recently. We downgraded Spectra Energy Partners (SEP). We have a "neutral" on ONEOK Partners. Again, the backdrops there are very strong, but so, too, are the valuations.

I think another thing to note is that every bank has a different ratings system. At UBS, it's done the same way across the entire department. We target a total return over the next 12 months and think about that total return in comparison to what we expect the broad market to generate. An 11% total return over the next 12 months generates a "buy" rating under our system today, and so when you have a name like Legacy that yields almost 9% - and we think not only is that going to be paid, but it will grow over the course of the next 12 months - it makes for a very achievable target...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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