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  • Roger S. Conrad

Focus Up

By Peter Staas on Feb. 22, 2017

MPLX LP (NYSE: MPLX) announced two deals last week, on the heels of the joint venture with Antero Midstream Partners LP (NYSE: AM) that we discussed in the Feb. 9 issue of Energy & Income Advisor:

  • The purchase of the Ozark pipeline from Enbridge Energy Partners LP (NYSE: EEP) for $220 million; and
  • The completion of a previously announced transaction to acquire a 9.2 percent interest in the Dakota Access pipeline from Energy Transfer Partners LP (NYSE: ETP) and Sunoco Logistics Partners LP (NYSE: SXL) for $500 million.

Although the purchase of the 9.2 percent stake in Dakota Access pipeline stems in part from the failure of the proposed Sandpiper project, this transaction—and the acquisition of the Ozark pipeline—demonstrate MPLX’s ability to leverage its strong balance sheet and Marathon Petroleum Corp’s (NYSE: MPC) demand pull to pursue accretive opportunities.

MPLX’s purchase of the Ozark pipeline looks like a good deal for both sides: Enbridge Energy Partners receives much-needed cash, while MPLX adds an asset that it can expand to move crude oil from Cushing, Oklahoma, to Marathon Petroleum’s Midwest refineries.

We remain bullish on MPLX’s long-term growth prospects in the Marcellus Shale and Marathon Petroleum’s plan to do away with the MLP’s incentive distribution rights. But the stock has enjoyed quite a run on our Focus List and has traded above our value-based buy target for some time.

Accordingly, we have dropped MPLX from our Focus List for the time being; investors sitting on big gains may also want to consider taking a partial profit off the table. MPLX LP stock remains a buy up to $36 per unit in the MLP Portfolio’s conservative sleeve.

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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor