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Even if you've already completed all shopping and are ready to embrace the holiday season, these MLPs are worth a second glance. Simply consider them an early gift for 2014.
First, most operate within the midstream business segment, meaning that they are actively engaged in processing and distributing produced natural resources, notably energy sources. And with the booming natural gas industry—the Energy Information Administration recently released a report indicating that U.S. natural gas production will soar 56% from through 2040—many MLPs are poised to benefit.
Specifically, the future of the energy landscape within the Appalachian region, home to the Marcellus and Utica Shales, looks bright. For instance, even before CONSOL Energy (NYSE: CNX ) recently closed a $3.5 billion deal to sell historic coal mines to focus on its natural gas business in Appalachia, it increased its Marcellus shale production 72%. And for perspective, CONSOL's net gas reserves grew 286% over the past five years.
In short, many midstream companies may benefit from building the necessary infrastructure to meet the rapid production growth.
Models that last
Then, to maximize efficiencies, many midstream businesses like MarkWest Energy Partners (NYSE: MWE ) and Sunoco Logistics Partners (NYSE: SXL ) partner with exploration and production companies like CONSOL, Range Resources, and Chesapeake Energy. The production companies guarantee a minimum volume of product over a period of time, enabling the midstream businesses to more effectively forecast future capital intensive projects. Additionally, the partnership model locks in customers (and cash) for midstream firms while providing peace of mind—and sometimes discounts—to the producers.
In addition to existing contracts with CONSOL Energy, Antero Resources, and other drilling firms, MarkWest recently announced a new, definitive agreement with Gulfport Energy Corporation. Under the contract, MarkWest and the Energy and Minerals Group will construct a condensate stabilization facility with initial stabilization capacity of 23,000 barrels per day, with plans to add an additional 30,000 Bbl/d of capacity. In addition to stabilizing raw condensate so it can be transported to end markets, the plant will become the primary hub for the Utica Cornerstone Pipeline, which is expected to become operational in 2016.
And the partnership model supplemented with high demand leads to a third key benefit: customized service.
Customization for the future
Many MLPs are able to customize their operations to specific customer requirements or requests—over a long period of time. For example, Sunoco Logistics Partners' Project Mariner East Phase One line is capable of transporting around 70,000 barrels of propane and ethane to a distribution facility, and the project was embraced because Sunoco Logistics knew it would secure long term customers. For instance, among other drilling companies it is currently engaged in a 15-year agreement with Range Resources, the "anchor shipper" for Project Mariner East. Plus, after receiving "considerable market interest," Sunoco Logistics announced a binding season earlier this month for its Mariner East Two project, and the pipeline is expected to begin operating in early 2016.
Spectra Energy (NYSE: SE ) and its subsidiary Spectra Energy Partners (NYSE: SEP ) are also leading the bandwagon via a division coined Texas Eastern Transmission. Known as TEAM 2014 Project, Spectra is preparing to meet customer demand by installing and upgrading a pipeline that will enable Texas Eastern to supply natural gas from the Appalachian region to demand areas across the U.S. Once complete, the pipeline will be transporting an additional 600 million cubit feet of product per day.
Spectra Energy is also eyeing the Appalachian region; it expects to invest around $4 billion by 2016 to further develop the infrastructure within the Marcellus and Utica Shales.
The producers of natural gas, like CONSOL Energy and Range Resources, are calling upon infrastructure builders so that production growth can be sustained and even continue. Therefore, MLPs like MarkWest Energy Partners, Sunoco Logistics Partners, and Spectra Energy are rising to the challenge.
2014 and beyond
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