Access to Higher Income is Right Around the Cornerhttp://www.fool.com/investing/general/2014/01/22/access-to-higher-income-is-right-around-the-corner.aspx Callum Turcan
January 22, 2014
How would you like to pocket at least 4% annually over the next 20 years, regardless of where the stock market goes? In order for this company to let you access such a safe yield, it had to build and acquire 6,800 miles of pipelines and other midstream assets in high growth shale plays.
Access Midstream Partners (NYSE: ACMP) has done a tremendous job investing in each of the major shale plays in the United States. With assets in the Marcellus, Utica, Eagle Ford, and Niobrara that all have a fixed-fee cost structure, Access Midstream Partners can provide growth and stability through a wide range of operations.
Access Midstream Partners' capital expenditures will drop from $1.65 billion in 2013 to $850 million in 2015. While capex decreases, projects are still coming online to drive up 2015 earnings before interest, depreciation and amortization, or EBITDA, to $1.25 billion from ~$825 million in 2013. At the same time, maintenance capital is guided to stay flat throughout that time period at $110 million.
Larger EBITDA, combined with stable maintenance costs and less expenditures means only one thing: distributable cash flow growth. More DCF turns into a larger distribution, driving up the yield and thus your return.
Quality future assets
To drive earnings higher, the trio will build four gas processing plants. Each plant will have the ability to process 200 MM cubic feet per day of natural gas, which is a much needed service. The group is also going to build out 135,000 barrels per day of fractionation capacity (for natural gas liquids), to be supplemented by an additional 870,000 barrels of NGL storage.
This is a fairly capital intensive project, which is why these three midstream companies decided to share the costs. Access Midstream owns 49% of the project while EV Energy Partners owns 21%, and M3 Midstream owns the rest. By splitting the costs, midstream companies can reduce risk and invest more in other parts of the country.
This isn't the first partnership Access Midstream Partners and EV Energy Partners have created. Both own stakes (66% Access, 9% EV Energy) in Cardinal Gas Services that services liquid production in the Utica. With 135 million cf/d of gathering capacity and 163 miles of pipelines, both are already sizable players in the emerging Utica story.
Quality current assets