Energy Business

Credit Suisse Has 5 Top Pick Energy MLPs for 2017

Top pundits and prognosticators on Wall Street thought it was virtually impossible to ever get the Organization of the Petroleum Exporting Countries and non-OPEC oil-producing nations to agree on a production cut, but they did, and with good reason. Many of the OPEC oil-producing nations located in the Middle East have one major export, and only one, and that is oil. With prices getting hammered into the mid-$20s almost a year ago, their government balance sheets took a beating.

The recent OPEC agreement in Vienna to curtail production, and the ability for the OPEC nations to get non-member countries to go along, is huge for oil prices. While the days of $100 per barrel will remain in the rear-view mirror, $50 or so levels look like the new normal. Credit Suisse is out with its five top pick stocks for 2017, and they all make sense for investors looking to add master limited partnerships (MLPs) to their portfolios now.

Here are the five top picks to Buy at Credit Suisse in order of their ranking.

EQT Midstream Partners

This company has remained a top midstream play across Wall Street. EQT Midstream Partners L.P. (NYSE: EQM) is a growth-oriented partnership formed by EQT Corporation to own, operate, acquire and develop midstream assets in the Appalachian Basin. The partnership provides midstream services to EQT and third-party companies through its strategically located transmission, storage and gathering systems that service the Marcellus and Utica regions. The partnership also owns 700 miles and operates an additional 200 miles of FERC-regulated interstate pipelines. It also owns more than 1,600 miles of high- and low-pressure gathering lines.

The company announced this week it plans to drill 119 wells in the Marcellus Shale play next year, with 76 in Pennsylvania and the remainder in West Virginia. It also plans to drill 81 Upper Devonian wells, which will be limited to co-development on Marcellus pads in Pennsylvania, and seven deep Utica exploratory wells. The company also announced 2017 capital expenditures forecast of $1.5 billion and said almost all of it, or $1.3 billion, is for well development. It did not include business development and land acquisitions.

Investors receive a 4.53% distribution. The Credit Suisse price target is a whopping $109, while the Wall Street consensus price objective is$80.74. Shares closed yesterday at $72.

Tallgrass Energy Partners

This is another favorite at Credit Suisse and comes in as the second top pick. 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, Wyoming, and terminating in Cushing, Oklahoma, that includes a lateral in northeast Colorado that commences in Weld County and interconnects with the pipeline just east of Sterling.

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, Nebraska.

Investors receive a 6.88% distribution. The $61 Credit Suisse price target is well above the consensus target of $53.73. Shares closed Tuesday at $46.23.