America Needs to Expand its Energy Infrastructure, Which Will be a Boon For Midstream MLPs

Operators of oil and gas processing facilities, storage plants, and transportation pipelines are sure to benefit from America's domestic energy boom.

Jan 13, 2014 at 10:20AM

The oil and gas boom in the United States keeps on ramping up. Oil production has reached levels not seen at any point in the last 25 years, according to the U.S. Energy Information Administration. In fact, domestic oil production could even reach the historic highs of 1970 shortly. Meanwhile, natural gas is enjoying a revolution of its own in the United States. This is due to massive domestic supplies that are suddenly viable thanks to new drilling techniques such as hydraulic fracturing.

Of course, if all this newly tapped oil and gas is to properly serve Americans, it needs proper infrastructure. This means pipelines, storage terminals, and processing plants, which are about to see huge demand for their services.

Why midstream MLPs should be in focus
MLPs, or Master Limited Partnerships, that engage in midstream activities have been winning big due to the shale revolution in the United States. Signs point to continuing the trend given the huge amounts of oil and gas resources in the most promising onshore fields in the U.S., including the Permian Basin, Eagle Ford, and Bakken shale formations, still in need of proper infrastructure for storage, processing, and transportation.

Consider that the United States Energy Information Administration reports that these three onshore plays are each at or near the 1 million barrel-per-day production mark. This means that the Permian Basin, Eagle Ford, and Bakken developments are the only three onshore fields in the United States to have reached that daily production total.

All that oil and gas needs processing, storing, and transporting, and that's where well-run midstream Master Limited Partnerships make their money. Enterprise Product Partners (NYSE:EPD) is proving the strength of oil and gas production in the United States with its business performance.

The company's liquids pipelines hit record volumes in the third quarter. In all, volumes transported by the company's natural gas liquids, crude oil, refined products, and petrochemicals pipelines increased by 845,000 barrels per day, or 20%, to a new record. And, Enterprise Products' adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, rose 9% through the first nine months of the year.

America's oil and gas boom will require major infrastructure investment
Midstream MLPs will need to vastly build out their existing infrastructure if they are to meet the unique set of challenges presented by the potential for true energy independence in the United States. Thankfully, Kinder Morgan Energy Partners (NYSE:KMP) and Plains All American (NYSE:PAA) are more than up to the task. They're both planning billions in spending to build miles of new pipelines, as well as additional storage and treatment facilities.

Kinder Morgan has identified more than $14 billion in investment opportunities to keep its growth strategy firmly on track. After releasing its third-quarter results, Chairman and Chief Executive Officer Richard Kinder stated, "We continue to see robust growth opportunities across all of our business segments."

For its part, Plains All American is in the process of a multi-billion dollar portfolio of its own organic growth investments. This should allow for 2014 to be a very profitable year for the company, and management expectations more than reflect this. Plains All American expects to generate 20% growth in its core fee-based activities.

Final thoughts: Midstream MLPs are positioned to excel
Midstream MLPs such as Enterprise Products Partners, Kinder Morgan Energy Partners, and Plains All American have a crucially important role to play in America securing its energy independence. They operate businesses similar to toll roads, in which they process and transport oil and gas across the country, and collect fees based on the volumes they move.

As a result, as economic growth in the United States improves in the year ahead, and as oil and gas production continues to ramp up, these three midstream MLPs should have great years ahead.

High yields are a staple with MLPs. Here are 9 others to investigate

One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it’s true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor’s portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Bob Ciura owns shares of Kinder Morgan Energy Partners LP. The Motley Fool recommends Enterprise Products Partners L.P.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers