A Wall Street Transcript Interview with Ethan Bellamy, Robert W. Baird & Co.'s Senior Analyst Covering Master Limited Partnerships and U.S. Royalty Trusts: Exposure to Crude Oil Logistics and Storage are the Favored MLP Investments in 2014

Wall Street Transcript

67 WALL STREET, New York - March 28, 2014 - 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: Increasing Demand for Midstream Assets - U.S. Energy Infrastructure Build Out - Emerging Shale Plays - Outlook for Natural Gas Liquids - Oil and Gas Investing - Shale Production Growth

Companies include: Plains All American Pipeline L (PAA), Linn Energy, LLC (LINE) and many others.

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

TWST: From the most recent quarterly earnings reports and calls, were there any particular themes or tone in management comments that stuck out for you?

Mr. Bellamy: The most salient thing we heard for energy investors as a whole in the fourth quarter of 2013 results were comments by Greg Armstrong of Plains All American (PAA), who said he expects at least one or two corrections in the next 18 months in U.S. crude oil prices. Now on the one hand, they make money on price differentials, so they're talking their book, but on the other hand they're transparent, honest, reliable, and have probably the best insight into the U.S. crude oil market than anybody does.

We're just producing a lot of oil. There's an imbalance between what we are producing, which is light sweet crude, and what the refiners are set up to process, which is heavier and more sour crude. We can't export crude oil en masse, so unless something changes the potential for a correction is certainly there.

TWST: Within MLPs there are upstream names, midstream and downstream. Do you find any one of those subsectors to be more or less favorable or promising than the others? How should investors look at those different areas?

Mr. Bellamy: If you follow through the thoughts from Plains, what has been - and we think will continue to be - one of the strongest businesses is crude oil logistics and storage, and more so on the logistics side, just because that is a critical market. We are not as oversupplied in oil as we are in natural gas. We think there is a lot of potential for growth in that arena, and that the underlying fundamentals of dislocations in the market, where you can make money moving crude from point A to point B, are still there.

And then I would say we are getting more company-specific in other sectors. If you have private-equity-sponsored companies that are overpaying for midstream assets, whatever those assets happen to be, then they're not going to be rewarded with the same type of strong yield and capital appreciation that other companies are; so a lot of it is, how are these businesses managed, and are the unitholders being brought along for the ride in sharing the returns, or are they just being used as a source of capital? So we're increasingly focused on company-specific situations.

TWST: Tell us more about what's happening on the acquisition front, M&A activity in the space, and what you expect this year.

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.

Rates

View Comments (0)