General Partner

Without the use of corporate structures called Master Limited Partnerships (MLPs) the midstream infrastructure build out that helped make the U.S. shale revolution possible over the past 5 years would have taken far longer to gain traction. MLPs were very successful as the market grew and high prices encouraged new oil and gas production. But along the way some of the businesses these structures were applied to crossed the line from toll-road fee based infrastructure into exposure to commodity prices. For this reason and others, today MLPs are struggling to attract growth capital in a low price environment. Today we conclude our series analyzing the future of MLPs.

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”.

Valero is the latest in a long line of US midstream companies to file their Master Limited Partnerships (MLPs) for an IPO – expected early in the New Year. These popular tax efficient entities were created over 25 years ago to encourage energy infrastructure investment. In the last four years the number of MLPs has shot up 50 percent. Today we describe how Valero’s MLP is structured.

A couple of weeks ago RBN’s Sandy Fielden  attended the Platts Master Limited Partnership (MLP) Symposium in Las Vegas and listened to a number of presentations about the performance of these specialized corporate structures and the rivers of investment capital that their high income yields are attracting. You can’t turn your head in the energy midstream business without bumping into an MLP. Today we explain what MLPs are and why they dominate today’s energy midstream business.

Before we start – a quick disclaimer. RBN Energy does not advocate investment in in MLPs. We are not an investment advisor.  The purpose of this article is not investment advice or endorsement.