5 Potential MLP and General Partner Buyout Candidates

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One thing that the massive sell-off in crude oil has done is revved up mergers and acquisitions speculation. The Alerian Master Limited Partnership (MLP) Index pulled back 24% from its 2014 peak to a bottom hit in January and has since recovered about 8%. The analysts at Credit Suisse say this has created a buying situation that some of the big boys in the energy industry may be ready to take advantage of.

For the purposes of discussion, the analysts at Credit Suisse have narrowed down to five potential takeover candidates. Three are MLPs and two are general partners. They are ONEOK Inc. (NYSE: OKE), ONEOK Partners L.P. (NYSE: OKS), Targa Resources Corp. (NYSE: TRGP), Targa Resources Partners L.P. (NYSE: NGLS) and MarkWest Energy Partners L.P. (NYSE: MWE).

ONEOK

This top company leads off the list and is a general partner that the Credit Suisse team see as a potential candidate for takeover. As of December 31, 2014, it owned 37.8% of ONEOK Partners, one of the largest publicly traded master limited partnerships, which is a leader in the gathering, processing, storage and transportation of natural gas in the United States and owns one of the nation’s premier natural gas liquids (NGL) systems, connecting NGL supply in the Mid-Continent, Permian and Rocky Mountain regions with key market centers.

The analysts think it is possible that industry giant Kinder Morgan could be one of a few players in the market for this company. They also think that the deal takeout premium could be as high as 20%. Phillips 66 and Plains GP Holdings were mentioned as other potential acquirers, with Phillips being the most competitive of the three. ONEOK stock closed trading on Tuesday at $49.20.

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ONEOK Partners

ONEOK Partners is the underlying MLP in the ONEOK company discussed above. The Credit Suisse team also thinks that just the MLP could be a potential takeover target. One of the companies that they think could be interested in making a deal is another industry powerhouse Plains All American Pipeline, which owns and operates midstream energy infrastructure and provides logistics services for crude oil, NGL, natural gas and refined products.

Plains All American owns an extensive network of pipeline transportation, terminaling, storage and gathering assets in key crude oil and NGL-producing basins and transportation corridors and at major market hubs in the United States and Canada. Phillips 66 Partners is also listed as a potential acquirer of this asset. The Credit Suisse team sees a takeover premium as high as 20%. ONEOK Partners close Tuesday at $42.56

Targa Resources

Targa Resources owns the general partner interest, all the outstanding incentive distribution rights and a portion of the outstanding limited partner interests in Targa Resources Partners. The company operates in two divisions, Gathering and Processing, and Logistics and Marketing. It is involved in gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting, terminaling and selling NGL and NGL products; gathering, storing and terminaling crude oil and refined petroleum products.

The Credit Suisse team again see’s Kinder Morgan, Phillips 66 and Plains GP Holdings as companies eyeing this outstanding asset. They also see the potential for a gigantic 100% takeout premium. Targa Resources closed trading most recently at $102.32.

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Targa Resources Partners

Targa Resources Partners was formed in October 2006 by its parent, Targa Resources, to own, operate, acquire and develop a diversified portfolio of complementary midstream energy assets. The partnership is a leading provider of midstream natural gas and NGL services in the United States, with a growing presence in crude oil gathering and petroleum terminaling. It is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling NGL and NGL products, including services to LPG exporters; gathering, storing and terminaling crude oil; and storing, terminaling and selling refined petroleum products.

The Credit Suisse analysts once again view Plains All American and Phillips 66 Partners as two companies likely to have an interest. They also again see a potential takeout premium as high as 100%. Targa Resources Partners closed Tuesday at $44.59.

MarkWest Energy Partners

MarkWest Energy Partners owns and operates midstream services related businesses. MarkWest has a leading presence in many natural gas resource plays, including the Marcellus Shale, Utica Shale, Huron/Berea Shale, Haynesville Shale, Woodford Shale and Granite Wash formation, where it provides midstream services to its producer customers.

The Credit Suisse team believes that Kinder Morgan, Phillips 66 Partners and Plains All American could all be viewing this asset as a potential acquisition. The difference is they only see a 10% takeout premium in this deal. MarkWest Energy Partners closed at $66.59.

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The Credit Suisse team points out in no uncertain terms they are not suggesting that any of the companies mentioned are actively pursuing any of these acquisitions, and the analysis presented are for example purposes only. However, given the potential for some of the industry giants to scoop up assets that contribute to growth and market share, the potential is there.