Small-Cap MLP Names Offer Best Risk/Reward Propositions in the Long Term, But Struggle with Volatility Spikes: An Expert Analyst Discusses Investing in the MLP Sector
67 WALL STREET, New York - April 9, 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: Energy Transfer Partners L.P. (ETP), Kinder Morgan Energy Partners (KMP), El Paso Pipeline Partners, L.P (EPB), Copano Energy LLC (CPNO), Sunoco Logistics Partners LP (SXL), Enterprise Products Partners L (EPD), EV Energy Partners LP (EVEP), Linn Energy, LLC (LINE), Atlas Pipeline Partners LP (APL), Plains All American Pipeline L (PAA), Dow Chemical Co. (DOW), Targa Resources Partners LP (NGLS) 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's the status of M&A activity?
Mr. Bellamy: M&A levels are very strong. We've seen a recent trend of crude rail logistics acquisitions in North Dakota. We've seen corporate-level M&A from Energy Transfer (ETE) and Kinder Morgan (KMP). Kinder bought El Paso last year, Copano (CPNO) this year. Energy Transfer bought LDH, Sunoco (SXL), Southern Union.
To the extent that there are willing sellers out there who will take a bid from an MLP, which is going to be pretty strong because of their very low cost of capital, we would expect both assets and corporations to continue to trade hands at a pretty healthy pace.
TWST: In terms of the different subsegments of upstream versus midstream versus downstream, do you find any to be more or less promising? Or is it more on a name-by-name analysis?
Mr. Bellamy: I think, frankly, that it's too broad to say upstream, midstream and downstream. I think you need to dive in more closely to get a good sense of performance. For example, within midstream you have mega caps like Enterprise Products (EPD), which is a fantastically well-run partnership. It's a name that everyone of any risk tolerance can and probably should own.
But also in the midstream, you have sub-billion-dollar market cap names. EPD and a small-cap name are going to perform very differently if we see enhanced volatility, so while over the long term we think that some of the best risk/reward propositions are in the small caps, tactically if we see volatility spike up, those small-cap names are going to get disproportionately hurt.
I think that what investors need to do is focus not just on names and stories that they like, but also be very conscientious...
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.
