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Published on Sep 28, 2016
Pipeline
MLPs have powered higher this year following a painful across-the board
downturn in 2014 and 2015. Darin Turner, portfolio manager at Invesco
IVZ, said the recovery in MLP shares is not complete, especially in
names like Rice Midstream Partners , Energy Transfer Partners , Plains All American Pipeline and Williams Partners . Rice Midstream Partners,
up 80% year-to-date, sports a healthy 3.9% dividend. This week the
company's parent Rice Energy announced the purchase of Vantage Energy
for $2.7 billion, including the assumption of debt. In connection with
the acquisition, Rice Midstream will purchase the acquired midstream
assets from Rice Energy for $600 million. The E&P assets to be
acquired by Rice Energy include approximately 85,000 net core Marcellus
acres in Greene County, Pennsylvania, with rights to the deeper Utica
Shale on approximately 52,000 net acres and 37,000 net acres in the
Barnett Shale. "Rice Midstream is 100% focused on the Marcellus Shales
and it will be the fastest growing MLP over the next five years," said
Turner. "The Vantage acquisition should almost double the size of its
operating base." Turner is also bullish on Energy Transfer Partners,
which has seen its shares rise 23% thus far in 2016. He said the
continued simplification of the company's structure will drive the stock
forward. "This is the cheapest MLP around trading at 16 times next
year's estimated earnings and the 11% dividend yield does not hurt
either," said Turner. Plains All American Pipeline, up 45% year-to-date,
is another one of Turner's top picks. He calls the company the "best
way to play production increases in the Permian Basin" and lauds its
9.3% dividend yield. Finally, Turner is a fan of Williams Partners, up
46% year-to-date, saying it owns "the best natural gas pipeline in
Transco" and that is the reason why acquirers are interested in the
company.
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