Alerian

For the past decade or more, master limited partnerships (MLPs) have been one of the most popular forms used by energy companies to capitalize themselves and one of the most rewarding for their investors. These investments offered income, in most cases steadily growing, at a time of historically low interest rates.  They also offered capital appreciation as the sector more often than not was one of the best performing in terms of equity returns.  So what explains the rapid collapse in value that has been experienced over the past few months?  Today in Part 2 of RBN’s series on MLPs, we delve further into that question, looking at Incentive Distribution Rights (IDRs) and our friends at Alerian provide a list of 118 MLPs including the “IDR splits”.

It’s hard to imagine how the massive build out of pipelines and processing plants required to deliver shale hydrocarbon production to end use markets in the past 5 years could ever have occurred without the corporate structures known as Master Limited Partnerships (MLP’s). These tax-efficient vehicles financed shale infrastructure by selling partnership units to investors that offered income in the form of cash distributions as well as growth from increasing unit prices. But the leading Alerian AMZ Index of MLP market capitalization fell 46% from August 2014 to December 31, 2015 in the wake of the oil price crash. Today we begin a series looking at past success and future prospects for MLPs.