Oil and gas master limited partnerships (MLPs) are tapping into liquids-rich shale formations across the U.S., sowing necessary energy infrastructure with the goal of harvesting handsome contracts, says Credit Suisse Managing Director Yves Siegel, CFA.
“I think what investors, or a lot of folks, lose sight of is that billions of dollars need to be invested in U.S. energy infrastructure, and the entities that are doing the heavy lifting are, for the most part, MLPs,” Siegel said. “In fact, going out the next three to five years, we think, on average, the MLP group should be able to grow distributions around 5%.”
Enterprise Products Partners (EPD) and Kinder Morgan Energy Partners (KMP) are two MLPs developing infrastructure in one important U.S. shale formation, the Eagle Ford shale in south Texas, Siegel says. Midstream oil companies recently invested $3.4 billion in the Eagle Ford shale’s infrastructure.
“The stuff [EPD is] building includes pipeline, fractionation and processing facilities. The Eagle Ford is just a burgeoning gas and oil play that’s requiring a lot of capital to be invested,” Siegel said.
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