Midstream master limited partnerships (MLPs), the pipeline and storage operators, provide an opportunity to invest in oil and gas that hedges against commodity price volatility and fluctuations in supply, says Raymond James Vice President Darren Horowitz.
“From a volume perspective, several midstream operators run fee-based assets; however, they may have either minimum volume commitments, MVCs, or other contractual provisions that mitigate volume volatility,” Horowitz said. “These contracts generate fees regardless of the actual capacity utilized on the asset or the volume that flows through the asset.”
Horowitz points to Enterprise Products Partners (EPD) as one of his top MLP plays. He says EPD runs the most vertically integrated supply chain, and it has one of the lowest costs of capital among MLPs and a transparent balance sheet with the capacity to pursue growth opportunities.
“When you think about best connecting the areas of the most prolific supply with areas of the greatest demand, Enterprise Products Partners is at the forefront,” Horowitz said. “They own/operate over 50,000 miles of pipeline that helps transport natural gas, natural gas liquids, crude oil and refined products.”
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