Most energy-related equities have taken some serious lumps since the second half of last year, hit by the precipitous decline in the prices of crude oil, natural gas and natural gas liquids (NGL).
With the exception of US independent refiners, most groups in the energy sector have pulled back since the end of last year’s second quarter.
The Alerian MLP Index, which tracks 50 prominent publicly traded partnerships, has pulled back by 17 percent. This resilience reflects the group’s focus on pipelines and other midstream infrastructure that often operates under longer-term, fee-based contracts.
MLPs’ above-average yields also make them popular among buy-and-hold retail investors, while their unique structure helps unitholders to defer taxes—until they exit their positions. This setup makes for a relatively stable investor base.
Although we expect MLPs to continue to outperform relative to other energy groups, investors shouldn’t overlook the headwinds facing these stocks and the potential for further downside.
Rather than viewing the space holistically, investors need to evaluate each MLP’s individual strengths, weaknesses and growth prospects.
In this issue, we review some of the risks in the MLP space, set dream prices for our favorite blue-chip MLPs and highlight a handful of names that offer exposure to growth stories that are independent of commodity prices or driven by drop-down transactions from supportive general partners.
Shares of US refiners have outperformed since oil prices swooned. Here's why and what's to come.
How US producers responded to plummeting natural-gas prices provides useful insight into how names with an oil-weighted output mix will contend with lower oil prices.
The price of a mixed barrel of NGLs on the Gulf Coast has plummeted by 45 percent since the end of the third quarter.
Surging production in the Marcellus Shale has also created challenges for producers and has important implications for investors and natural-gas prices in other regions.
There's more pain ahead for the energy sector.
First Solar and SunPower Corp announced a yieldco earlier this week. Should you believe the hype?
Oil and gas producers worldwide have felt the sting from lower energy prices. Although much of the media attention has focused on the US companies spearheading the shale revolution, their counterparts north of the border arguably have taken a harder hit.
A number of trends suggest that the MLP space is poised for consolidation. Here's how to play it.
Despite management's best efforts, there's more downside in store for Linn Energy.
Elliott and Roger on Mar. 3, 2015
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