The MLP earlier this year announced that a fire at one of its main processing facilities and weak NGLs prices in the second quarter would prevent management from achieving its goal of raising the distribution to at least $0.25 per unit. Nevertheless, the integration of BP’s panhandle system and a solid slate of midstream expansion projects should enable the firm to reach this goal in 2013.
As management continues to reduce the MLP’s exposure to commodity prices, expect the stock’s yield premium to narrow relative to its peers. Assuming an annualized distribution of $1 per unit and a target yield of 7.5 percent, the stock could fetch $13.50 per unit by the end of next year.
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Elliott and Roger on Oct. 29, 2018
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