Despite the shock of war, the situation in Ukraine eventually will be sorted out. And despite the potential for closure there, many across Wall Street feel that will not end the supply-demand situation around the world for oil. The energy business has been a boom and bust industry for decades, and the United States was net importer of oil for years until the shale boom turned the tables. In November 2019, the United States became a net exporter of all oil products, including both refined petroleum products and crude oil. By 2021, the United States was the world’s largest producer.
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The current administration, and many others around the world, are adamantly opposed to fossil fuels. Many of the big producers, sensing ESG (environmental, social and governance) pressures, decided to focus on free cash flow and returning profits to shareholders via dividends and stock buybacks, instead of increasing production.
It is estimated that the world consumes over 97 million barrels of oil per day. Despite electric vehicles and an increase in renewables, that number likely will not decline for years. But production has, and in a simple supply and demand scenario, at least for the foreseeable future, demand will exceed supply and many across Wall Street and the sector feel that oil could hover around the $100 and higher a barrel level for some time.
For investors looking to benefit from higher oil prices, but acknowledging the massive run energy stocks have had over the past year, the energy master limited partnerships (MLPs) may provide exposure to the sector and some rich distributions. We screened our 24/7 Wall St. energy research database and found five companies with Buy-rated stocks that pay investors handsomely. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Energy Transfer
This top MLP is a very safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
This publicly traded limited partnership has core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGLs) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.
After the purchase of Enable Partners last December, Energy Transfer now owns and operates more than 114,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.
The completion of the transaction was immediately accretive to Energy Transfer and furthers Energy Transfer’s deleveraging efforts. It also adds significant fee-based cash flows from fixed-fee contracts. Additionally, the combined operations of the two companies is expected to generate annual run-rate cost and efficiency synergies of more than $100 million, excluding potential financial and commercial synergies.
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