Energy Business

5 Contrarian Energy MLPs Under $10 With Massive Dividends and Potential Upside

This segment owns interests in approximately 1,422 miles of crude oil pipelines located offshore in the Gulf of Mexico. Its Sodium Minerals and Sulfur Services segment provides sulfur-extraction services to refining operations, and it operates storage and transportation assets. This segment provides services to 10 refining operations and sells sodium hydrosulfide and caustic soda to industrial and commercial companies involved in the mining of base metals.

The company’s Onshore Facilities and Transportation segment provides onshore facilities and transportation services to Gulf Coast crude oil refineries and producers by purchasing, transporting, storing, blending and marketing crude oil and refined products. It operates a suite of approximately 200 trucks, 300 trailers, 397 railcars and terminals and tankage with 4.3 million barrels of storage capacity in various locations along the Gulf Coast. This segment also transports crude oil and carbon dioxide. It owns four onshore crude oil pipeline systems with approximately 460 miles of pipe located primarily in Alabama, Florida, Louisiana, Mississippi and Texas, as well as two carbon dioxide pipelines with approximately 269 miles of pipe. Its Marine Transportation segment offers waterborne transportation of petroleum products and crude oil in North America.

Investors receive an 11.61% distribution, after a 73% cut that was made back in March of this year. The $10 Royal Bank of Canada price objective is well above the $7.50 consensus target. Shares traded most above $5 this past week.

Noble Midstream Partners

This is one of the highest yielding midstream plays, and it looks to have solid upside as well. Noble Midstream Partners L.P. (NYSE: NBLX) primarily provides natural gas gathering, processing and water services in Colorado and Texas. Its assets reside in two of the most resilient oil basins in the United States: the DJ Basin in Colorado and the Delaware Basin in Texas.

The company owns and operates the Advantage Pipeline, a 16-inch common carrier crude oil pipeline serving the southern Delaware Basin (assets owned by a joint venture with Plains All American Pipeline).

Noble Energy recently was purchased by Chevron, and Noble Midstream announced it has entered into a definitive agreement to acquire the partnership’s incentive distribution rights and substantially all of Noble Energy’s remaining midstream interests for $1.6 billion.

The company also cut the distribution 73% back in March, but it still pays a 15.76% distribution. Piper Sandler has set an $11 price target. The consensus target is $8.60, and shares have traded near $8 for the past month.

Plains All American Pipeline

This remains a top MLP pick across Wall Street. Plains All American Pipeline L.P. (NYSE: PAA) is primarily engaged in midstream crude oil activities, including transportation, gathering, marketing and terminaling.

Top analysts, including the Goldman Sachs team, feel the company deserves a premium valuation given its leverage to the Permian and attractive organic growth backlog. The company 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. On average, Plains All American handles more than 6 million barrels per day of crude oil and NGL in its Transportation segment.

Investors still receive a solid 9.69% distribution. The TD Securities price objective is $13. The consensus target price is $11.32. Shares traded near $7.50 late in the week.

It has been some time since we have covered the energy MLPs, and the sector has been in turmoil for almost a year. Again, we checked all of the distributions to make sure they were still intact, and while some seem inordinately high after the giant cuts that have been made, that is more a reflection of the very low dollar prices for the stocks.

It should be noted that any of these companies could always lower or even eliminate the payouts again, but with West Texas Intermediate crude seemingly finding a floor at the $40 a barrel level, and many across Wall Street positive on the prospects for energy in 2021 as the pandemic wanes as a COVID-19 vaccine is available, the prospects here look very good for aggressive growth and income investors looking to take a contrarian shot.