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Best MLPs for 2009



December 26, 2008 – Comments (0) | RELATED TICKERS: ETP , MMP , EPD

Well, right now is the time to look at picking up some MLPs.  The prices have been discounted for the holidays and should make great new year's gifts.  But which ones are the best to consider?  While I was wondering about that prospect Morningstar wrote an article about it.  How about that?

Finding True Value in Master Limited Partnerships

The Winner's Circle
So which MLPs make the grade by avoiding undue commodity exposure, maintaining strong distribution coverage, and working from a secure liquidity position? We've picked five names that we think do an exceptional job of balancing distribution stability with distribution growth. Any one of these, in our view, presents a compelling risk/reward proposition.

Energy Transfer Partners (NYSE:ETP - News)
With a successful debt offering adding to the company's liquidity position and several years' worth of major projects just recently entering service, we think Energy Transfer will be able to maintain its growth momentum. We would not be surprised if Energy Transfer slowed or halted distribution growth in 2009, but we would expect to see any nondistributed cash deployed to fund growth projects, generating solid returns in years ahead.

Magellan Midstream Partners (NYSE:MMP - News)
Weak demand for refined products, particularly gasoline, has hurt Magellan's throughput volumes this year, but we don't think cash flows are likely to suffer nearly as much as throughput. Investments in storage assets and terminals plus an inflation-adjusted pipeline tariff should continue to enable Magellan's steady growth.

Enterprise Products Partners (NYSE:EPD - News)
Enterprise has $2.2 billion in available liquidity and stable, fee-based assets stretching across the entire midstream energy value chain. Its cash position should allow Enterprise to continue its investment program without tapping equity markets in 2009, and it also puts Enterprise on our short list of potential industry consolidators.

Kinder Morgan Energy Partners (NYSE:KMP - News)
While the majority of Kinder's cash flows stem from predominately fee-based pipeline transportation contracts, nearly a quarter of Kinder Morgan's cash flows are derived from oil production through its CO2 business. We've long admired Kinder's very conservative hedging program that locks in selling prices for up to five years, creating a predictable, stable cash flow stream.

Plains All American Pipeline (NYSE:PAA - News)
As the largest operator of crude oil transportation and storage assets in the United States, Plains All American is in a great position, in our view, to benefit from falling oil prices. When oil is cheaper on the spot market than in the future, producers and traders are willing to pay premium prices to store oil at Plains' Cushing facility. We think this market dynamic will continue to benefit Plains over the next several quarters.

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