TJ Schultz, Analyst with RBC Capital Markets, says Enterprise Products Partners L.P. (EPD), a bellwether for the MLP sector, is one of his favorite defensive names in the space. Unlike less defensive peers, Schultz says Enterprise is continuing rather unaffected from a growth perspective as producer customers slow their drilling plans.
“EPD has no general partner, it has high distribution coverage, it is investment-grade, and the growth profile really hasn’t budged in our view,” Schultz says. “So you’ve seen a pretty distinctive split between those MLPs that we view as defensive and those that have a little bit more exposure to some of the changes in producer activity.”
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Meanwhile, other MLPs are working to gather as much information as possible from producer customers. Schultz says the market is just now starting to get a sense from midstream companies on what the next stage of growth will look like in the current commodity price environment.
“It’s kind of company-specific within the MLP space, and those that have more commodity exposure or more volume sensitivity have, as I said, chosen to be more prudent on growth and react to what their producer customers are saying,” Schultz says.
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