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MLP Portfolio: The Outperformance Continues

By Elliott H. Gue on Mar. 12, 2014

Since the MLP Portfolio’s inception on Nov. 15, 2013, our holdings have delivered an average total return of 7.16 percent, compared to the 2.16 percent return generated by the benchmark Alerian MLP Index.

Over this period, the Portfolio’s conservative sleeve has generated an average total return of 8.9 percent, while our aggressive holdings are up 5.3 percent.

Here’s our updated take on these master limited partnerships (MLP) and our analysis of their fourth-quarter results and growth prospects.

Note that we have also updated our comments in the MLP Ratings table for many of the 100 names that we track; we will complete this review over the coming days.

Access Midstream Partners LP (NYSE: ACMP) – Low-Risk Distribution Growth

Access Midstream Partners LP grew its fourth-quarter gathering volumes by 31 percent and its cash flow by 87 percent from year-ago levels, supporting distribution growth of 23.3 percent year over year (3.7 percent sequentially).

The MLP boasts one of the leading gathering and processing footprints in the liquids-rich cores of Appalachia’s Marcellus Shale and the Eagle Ford Shale in south Texas, where pad drilling and simultaneous operations (sinking multiple wells at the same time) continue to drive output growth.

Chesapeake Energy Corp (NYSE: CHK) still accounts for about 72 percent of Access Midstream Partners’ total volumes, though this proportion should decline as the former continues to divest assets to fund its drilling program. Management has indicated that the two companies work closely to ensure that development plans align with midstream capacity additions.

The MLP has several gathering, processing and fractionation projects slated to come onstream in the Utica Shale next year, which should contribute meaningful volume growth in coming years.

Management continues to evaluate potential bolt-on acquisitions in the Utica Shale, the Marcellus Shale and the Eagle Ford Shale. Case in Point: The recent acquisition of compression horsepower from in the Utica and Marcellus from MidCon Compression for $160 million.

The stock remains one of our top picks for low-risk distribution growth. Weather-related disruptions in the first quarter and Global Infrastructure Partners’ recent moves to monetize some of its interest in the MLP could give investors a solid buying opportunity.

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