Oppenheimer Continues to Like Top High-Yielding MLPs

July 11, 2013 by Jon C. Ogg

The biggest concern to investors in master limited partnerships (MLPs) has been rising interest rates. The MLP analysts at Oppenheimer point out that in four out of the past five times interest rates have risen, the Alerian MLP index (AMZ) of stocks remained positive. In fact, the AMZ outperformed the S&P 500 in three out of four times in those same periods. For the MLPs under their coverage, the Oppenheimer analysts forecast median 2014 distribution growth of 5.6%, as the growth profiles for their companies continue to develop. Here are the top Oppenheimer MLP stocks to buy.

Enterprise Products Partners L.P. (NYSE: EPD) tops the list of stocks to buy at Oppenheimer. When comparing the upcoming earnings to the same period last year, analyst are expecting revenues will grow 16.7% while earnings per share will increase 7.8%. The Oppenheimer price target is $67. The Thomson/First Call estimate is at $66. Investors receive a 4.3% distribution. MLP distributions may contain return of principal.

Regency Energy Partners L.P. (NYSE: RGP) engages in gathering, treating, processing, compressing and transporting natural gas and natural gas liquids (NGLs). The company operates in Gathering and Processing, Natural Gas Transportation, NGL Services and Contract Services segments. Oppenheimer’s $28 price target is the same as the consensus target. Investors are paid a hefty 6.9% distribution.

Enbridge Energy Partners L.P. (NYSE: EEP) owns and operates crude oil and liquid petroleum transportation and storage assets, as well as natural gas gathering, treating, processing, transportation and marketing assets in the United States. Oppenheimer has placed a $36 price target on the stock, and the consensus target is $32. Investors receive a very solid 7.0% distribution.

Plains All American Pipeline L.P. (NYSE: PAA) is a top stock to buy at many of the Wall Street firms we cover. The company announced Monday that its new quarterly distribution represents an increase of 10.3% over the quarterly distribution paid in August 2012 and an increase of approximately 2.2% over the quarterly distribution paid this May. The Oppenheimer price objective is $64, while the consensus target is at $62.25. Unitholders are paid a 4.1% distribution.

Breitburn Energy Partners L.P. (NASDAQ: BBEP) is a stock to buy for investors seeking high yield. The stock was upgraded to Buy from Neutral Monday at Robert W. Baird, and the CEO recently bought almost a half a million dollars worth of the company’s shares. The Oppenheimer target is $23, and consensus stands at $22. Unitholders receive a whopping 11.3% distribution

LRR Energy L.P. (NYSE: LRE) is another MLP with a huge distribution. Management said that production during April and May averaged 6,450 barrels of oil equivalent per day (Boe/d). That was up from 5,900 Boe/d in the first quarter, and at the high end of the expected production for the year of between 6,250 and 6,550 Boe/d. Oppenheimer has an $18 target, the same as the consensus target. Investors receive a huge 13.6% distribution.

EV Energy Partner L.P. (NASDAQ: EVEP) has built an asset base of long-life reserves and, at last count, the company had 905-billion cubic-feet equivalent, or Bcfe, of oil and gas reserves. Those reserves have an estimated reserve life of about 15 years and are 67% natural gas. The company has reserves spread across several states. The Oppenheimer price target is set at $49, but the consensus target is higher at $50. Unitholders are paid a strong 8.2% distribution.

Mid-Con Energy Partners L.P. (NASDAQ: MCEP) has posted impressive growth in recent years. Nearly an 80% jump in first-quarter revenues is in line with its high growth pattern, while a 126% surge in earnings may be indicative of where the company is headed in quarters to come. Oppenheimer has a $27 price target and the consensus is at $27 also. Investors receive a large 9.1% distribution.

New Source Energy Partners L.P. (NYSE: NSLP) is an upstream MLP that produces primarily liquids-rich oil and natural gas products solely from the Hunton formation in East Central Oklahoma. More specifically, it owns 91,000 acres and has 216 producing wells in the Golden Lane Field. Oppenheimer has a $23 price target, and the consensus is at $24. Investors are paid a 5.5% distribution.

Despite the concerns over impending increases in interest rates, the Federal Reserve has yet to taper their bond buying program, let alone raise interest rates. By most estimates, the first increases in the federal funds rate will not occur until 2015. The Oppenheimer analysts believe continued demand for yield-based investments and the comparatively attractive yields provided by MLPs will continue to provide for additional fund flows into the sector. This may provide investors with a solid total return potential for some time.

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