Energy Business

Despite Rally, MLP Index Still Down for 2016: 4 Quality Companies to Buy

Genesis Energy

This is another top company that has fought its way through the sector trouble. Genesis Energy L.P. (NYSE: GEL) operates in the midstream segment of the oil and gas industry in the Gulf Coast region of the United States. Its Onshore Pipeline Transportation segment transports crude oil and carbon dioxide.

The midstream segment owns four onshore crude oil pipeline systems with approximately 500 miles of pipe located primarily in Alabama, Florida, Louisiana, Mississippi and Texas, as well as CO2 pipelines with approximately 270 miles of pipe. The Offshore Pipeline Transportation segment transports crude oil and owns various offshore crude oil pipeline systems, with approximately 1,200 miles of pipe located offshore in the Gulf of Mexico.

The company’s Refinery Services segment processes high-sulfur gas streams to remove sulfur for refineries. This segment provides services to 10 refining operations located primarily in Texas, Louisiana, Arkansas, Oklahoma and Utah, and it sells the by-product sodium hydrosulfide and caustic soda to industrial and commercial companies involved in the mining of copper, molybdenum and other base metals, as well as in the production of pulp and paper.

The Marine Transportation segment offers waterborne transportation of petroleum products and crude oil in North America. This segment owns fleet of 71 barges, with a combined transportation capacity of 2.6 million barrels, and 33 push/tow boats.

The Supply and Logistics segment provides services primarily to Gulf Coast oil and gas producers and refineries through a combination of purchasing, transporting, storing, blending and marketing of crude oil and refined products, such as fuel oil, asphalt and other heavy refined products. This segment operates a suite of approximately 300 trucks, 400 trailers, 562 rail cars and terminals and tankage with 2.9 million barrels of storage capacity in various locations along the Gulf Coast.

Genesis shareholders receive an 8.52% distribution. The RBC price target of $38 is right in line with the $38.17 consensus price objective. The shares ended last week at $30.72.

Tallgrass Energy Partners

This one rounds out the four picks and also offers investors a solid and well-covered distribution. Tallgrass Energy Partners L.P. (NYSE: TEP) provides crude oil transportation to customers in Wyoming, Colorado and the surrounding regions through Pony Express, which owns the Pony Express System, a crude oil pipeline commencing in Guernsey, Wyo., and terminating in Cushing, Okla., that includes a lateral in northeast Colorado that commences in Weld County and interconnects with the pipeline just east of Sterling, Colo.

In addition, the company provides natural gas transportation and storage services for customers in the Rocky Mountain and Midwest regions of the United States through the Tallgrass Interstate Gas Transmission system, a FERC-regulated natural gas transportation and storage system located in Colorado, Kansas, Missouri, Nebraska and Wyoming, and the Trailblazer Pipeline system, a FERC-regulated natural gas pipeline system extending from the Colorado and Wyoming border to Beatrice, Neb.

Investors receive a 6.97% distribution. RBC has a $40 price target, but the consensus estimate is higher at $45.23. The shares closed Friday at $36.71.


All four of these top picks make good sense for investors looking to play a second-half 2016 and 2017 sector rebound. Should oil languish in the recent trading range, they should still offer stability. It is important to remember that MLP distributions may contain return of capital.

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