Organic Growth for Midstream and Acquisitions for Upstream MLPs: A Wall Street Transcript Interview with Christopher P. Sighinolfi, Director at UBS Investment Bank
67 WALL STREET, New York - April 8, 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: I was going to ask you how these companies are growing today. Is it by acquisition, is it driven by new exploration activity, or expansion of existing plays and facilities?
Mr. Sighinolfi: It's different depending on where a company is within the value chain. Lots of midstream players have fairly sizable organic growth backlogs. Some of the largest players within that space are supplementing their organic growth with acquisition opportunities.
In that context, think about Kinder Morgan (KMI) buying El Paso (EPB) a year ago and now buying Copano (CPNO); that supplements a lot of what they have on an organic basis. Williams (WMB) is doing the same thing - very strong organic buildout, but supplementing that with acquisitions of Caiman Midstream and now half of Access Midstream (ACMP). Those are two of the largest C-Corp/MLP combinations, so I think to move the needle, they are looking to acquisitions.
But then on the upstream side, because organic drilling requires a lot of capital investment - and typically areas where these companies will be drilling have steeper rates of decline than their base programs - that is really a market much more predicated on acquisitions for growth, and that's been the strategy employed by the upstream MLPs.
And that also dovetails with a pretty nice environment for acquisitions right now, because these companies have effectively taken mature properties, put them into an MLP structure, and made them yield vehicles. As such, they trade at significantly higher multiples than the companies from which they are buying, and so there are opportunities for accretive transactions to occur. We are seeing a lot of that.
We are seeing independent upstream players that have not hedged facing the realities of current natural gas...
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.
