In the video below, Motley Fool analyst Joel South highlights the tax efficiency of master limited partnerships, or MLPs.  MLPs are an organizational structure restricted to companies involved in the production of natural resources; this structure provides significant benefit to shareholders through essentially eliminating the double taxation of dividends paid to shareholders and requiring companies to make large distributions to shareholders.

Seadrill (NYSE: SDRL) recently became the first company to create an offshore drilling MLP, Seadrill Partners (NYSE: SDLP). Seadrill Partners recently completed a $207 million public offering that has allowed it to acquire four drill ships that are each signed to long-term contracts.  Seadrill's management expects its MLP to be the fastest growing MLP in the market over the next three to five years as the company looks to accelerate growth and claim market share.  

In just over one month since its IPO, Seadrill Partners has already generated positive returns for investors. As detailed in this video, the investment thesis for both Seadrill and Seadrill Partners, based on continued fleet growth and sizable dividend payments, will continue to reward investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.