Crestwood Equity Partners (CEQP) isn't a household name by any means, even for those who know the energy sector well. However, one of the benefits of its relative obscurity is that investors can currently buy this master limited partnership (MLP) for a bargain price. That's exactly what analysts at investment bank UBS recently suggested after they upgraded to it to buy and set a $27 price target, which alone implies about 9% upside. However, that could easily be underestimating the payoff patient investors could earn given what seems to be coming down the pipeline.

Getting back on solid ground

Like many MLPs, the oil market downturn hit Crestwood hard. The partnership found itself stretched way too thin when market conditions deteriorated, which forced it to work hard to turn things around. One of the many decisions it made was cutting shareholder distributions, which it needed to do after coverage dropped to 0.76 times at the end of 2015, meaning Crestwood only generated enough cash to cover 76% of what it paid out to investors. However, the reset payout -- which still yields an impressive 9.7% -- is now on a much firmer foundation: Crestwood covered it with cash flow by 1.19 times last quarter.

Stacks of $100 bills.

Image source: Getty Images.

In addition to cutting its payout to conserve cash, Crestwood also sold assets and formed joint ventures to shore up its balance sheet and obtain the funding it needed to continue expanding its business. One of the biggest deals was a $975 million joint venture with utility Consolidated Edison (ED 0.41%) for 50% stake in Stagecoach Gas Services, which is a natural gas pipeline and storage business in the Northeast. That cash infusion helped Crestwood reduce leverage from a concerning 4.75 times at the end of 2015 to a much more comfortable 4.1 times last quarter. Furthermore, the strategic partnership will lead to the expansion of Stagecoach, with Consolidated Edison kicking in half of the financing on those future projects, freeing up Crestwood's capital for others.

Crestwood struck similar strategic partnerships with a private equity fund as well as with Royal Dutch Shell (RDS.A) (RDS.B) and its MLP Shell Midstream Partners (SHLX). Those transactions likewise provided Crestwood with some incremental cash to pay down debt while also shifting a portion of future growth funding to its partners. Shell Midstream Partners, for example, bought a 50% stake in Crestwood's recently completed Nautilus gas gathering system, providing the company with cash to reinvest in growth projects as well as pay off some debt. That system gathers most of the natural gas produced by Shell in the Delaware Basin under a long-term, fee-based contract, so it will provide steady cash flow to its owners for years to come.

A close-up of a gas pipeline under construction.

Image source: Getty Images.

On the verge of turning around

Growth projects like Nautilus and others Crestwood has under construction should reverse the decline in its cash flow, which has been under pressure due to the impact of lower oil and gas prices and asset sales. In Crestwood's estimation, earnings will rise about $30 million next year and increase a total of $120 million by 2021. That's a healthy growth rate for a company that should generate between $380 million to $400 million in earnings this year.

Because of that visible growth, Crestwood believes that it could start increasing its already generous distribution in the second half of next year. While Crestwood has yet to quantify future distribution growth, UBS pegs it at or above 5% annually from 2019 through 2021 if the company chooses to maintain its conservative 1.2 coverage ratio. Meanwhile, it could grow the payout at an even faster rate if it distributes a larger percentage of its cash flow or secures additional expansion projects.

The total package

This forecast suggests that Crestwood Equity Partners' jaw-dropping 9.7%-yielding distribution is not just on solid ground but likely heading higher in the years ahead. Even better, investors can buy that growing income stream for an excellent price considering that UBS believes the company is worth nearly 10% more than its current market valuation. Patient investors could potentially earn a roughly 20% total return in the coming year with the possibility of earning mid-teens returns in those that follow if Crestwood's growth plan goes off without a hitch.