MLPs Searching For A New Look

“Refracs” (when today’s new technology is applied to a previously fracked well) are delivering some impressive results for DVN in the Barnett shale for around $600K per well. But as in the past, ENLC will benefit as DVN sheds those assets in a region that they don’t deem strategic, to others willing to invest the time and capital. Nonetheless, a play believed to be in decline continues to maintain flat production.

Cheniere (LNG) explained how, in signing up customers for their next export facility, they can guarantee capacity from Sabine Pass as a stop-gap. Producers are sometimes unwilling to make a binding commitment to use new infrastructure when they’re unsure it’ll get built. LNG’s early-mover advantage allows them to guarantee capacity on Train 3 to producers who sign up for yet-to-be-built Train 6, which makes it easier to get customer commitments.

The industry’s fundamentals are good but complaints were heard that questions of structure continue to dominate. Many feel the MLP-only indices are losing relevance, and unanswered questions linger over the future of MLP-dedicated funds such as the Alerian MLP ETF (AMLP) and many mutual funds, since they face a shrinking number of MLPs to hold (see The Alerian Problem).

Next year REITs will apparently be added to the conference, which is relocating to Las Vegas. The conference organizers grasp the need for a broader approach.

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Disclosure: We are long CEQP, ENB, ENLC, KMI, LNG, PAGP and WMB. We are short AMLP.

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