Energy Business

Deutsche Bank Says the Strong MLPs Will Survive: 4 Top Picks for 2016

MPLX

This company reported very solid numbers last year and may be more off the radar for some investors. MPLX L.P. (NASDAQ: MPLX) is a growth-oriented MLP formed in 2012 by Marathon Petroleum to own, operate, develop and acquire pipelines and other midstream assets related to the transportation and storage of crude oil, refined products and other hydrocarbon-based products. Its assets consist of a 99.5% equity interest in a network of common carrier crude oil and products pipeline assets located in the Midwest and Gulf Coast regions of the United States and a 100% interest in a butane storage cavern located in West Virginia, with approximately a million barrels of natural gas liquids storage capacity.

MPLX owns and operates a network of pipeline systems that include approximately 1,004 miles of common carrier crude oil pipelines and approximately 1,902 miles of common carrier product pipelines in nine states.

The company made a very well-timed and strategic purchase of MarkWest Energy last year for approximately $1.28 billion. The deal combined MarkWest, the second-largest processor of natural gas in the United States and largest processor and fractionator in the Marcellus and Utica shale plays, with MPLX. The combination created one of the largest MLPs, which is expected to generate a mid-20% compound annual distribution growth rate through 2019.

MPLX unitholders receive a 5.1% distribution. The Deutsche Bank price target is $51. The consensus target is $48.65. Shares closed most recently at $36.83.

Phillips 66 Partners

This is the other top pick solid sponsorship name to buy now at Deutsche Bank. Phillips 66 Partners L.P. (NYSE: PSXP) is a growth-oriented MLP formed by Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquids pipelines and terminals and other transportation and midstream assets.

The company recently declared a third-quarter 2015 cash distribution of $0.428 per common unit. The distribution represents an increase of 7% over the previous quarterly distribution of $0.40 per unit and a 35% increase over third-quarter 2014. This increase is consistent with previous guidance that the partnership expects a 30% compound annual distribution growth rate from the last quarter of 2013 through 2018 — the kind of consistent increases that Wall Street and investors applaud.

Unitholders receive a 2.9% distribution. The $80 Deutsche Bank price target is higher than the consensus target of $70.70. Shares closed Wednesday at $58.08.


With strong sponsorships, and well thought out capital expenditure plans, these companies can fight their way through to better days and come out perhaps even stronger. The sector is still weak though, and these are more suitable for aggressive growth accounts.