IPO Analysis: Mammoth Energy Partners LP (NSDQ: TUSK)
Unlike most master limited partnerships, Mammoth Energy Partners LP will pay a quarterly distribution that varies based on the cash flow generated by the smattering of oil-field services businesses arrayed under its banner. In other words, investors seeking a reliable quarterly distribution should look elsewhere.
Buying the Selloff: Upbeat on Downstream Operators
Shares of US refiners have languished in recent months, but out outlook for regional crude-oil prices suggests that our two favorites should be in the money once again in 2015. Meanwhile, our favorite airline stock provides a hedge against lower crude-oil prices and has sold off precipitously amid fears that an ebola pandemic will curtail travel. Buy now.
Q2 in Review: Aggressive MLP Portfolio
Our Aggressive MLP Portfolio has delivered a total return that’s on par with the Alerian MLP Index, as the big gains posted by our turnaround picks have been offset by higher-yielding fare that has lagged the market.
MLP Relative Valuations
Looking at relative valuations is one strategy for investors to identify inexpensive MLPs whose valuations don’t reflect their growth prospects.
Oddball V-MLPs
Publicly traded partnerships that pay a variable distribution are a niche part of the MLP space that’s home to several oddball MLPs that have few mainstream analogues.
V-MLPs: A Refined View
Three of the 10 publicly traded partnerships that pay variable distributions own and operate small refineries and related assets. Although these stocks were hot commodities when they first went public, investors’ interest cooled after crack spreads narrowed and distributions shrank rapidly. But there’s opportunity in this space for investors with a nose for value and special situations.
Distributions May Vary: The Smart Investor’s Guide to V-MLPs
Many energy-related masted limited partnerships (MLP) own assets that generate reliable cash flow and exhibit limited sensitivity to commodity prices, credit conditions and the state of the economy.
Names that own midstream assets–pipelines and other infrastructure that transport hydrocarbons from the wellhead and prepare them for sale–often generate their cash flow from multiyear agreements that guarantee a minimum payment. Of course, investors must keep tabs on when these contracts end and whether expiring contracts can be renewed at similar, or more favorable, terms.
Whereas publicly traded partnerships usually privilege reliable cash flow and distribution growth, variable-rate MLPs (V-MLP) offer a different value proposition and make no effort to hedge their exposure to commodity prices or economic conditions.
These publicly traded partnerships deliver distribution coverage of 100 percent each quarter, but their payouts will vary depending on the performance of their underlying business.
Most V-MLPs own and operate downstream assets such as refineries or chemical plants–industries where earnings fluctuate with commodity prices and exhibit greater volatility than in the midstream segment.
When V-MLPs’ underlying businesses are in the sweet spot, these names can deliver big-time price appreciation and stratospheric yields of 20 percent to 30 percent; however, if business conditions deteriorate, it’s not unheard of for a V-MLP to omit its quarterly payout entirely.
Here’s our guide to the high risks and rewards in this niche segment of the MLP market.
Chemical Dreams and V-MLPs
With the exception of PetroLogistics LP (NYSE: PDH), which received a takeout bid from Koch Industries, the five V-MLPs that produce chemicals have struggled this year. We check these names for signs of value.
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Experts
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Elliott H. Gue
Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor
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Roger S. Conrad
Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor