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Guide to Oil and Gas MLPs

by on Feb 04, 2014

  • 6,040 views

Despite the Federal Reserve's moves to start easing its economic stimulus, interest rates are still at record lows. This means investors continue to have no choice but to look for better yields in the ...

Despite the Federal Reserve's moves to start easing its economic stimulus, interest rates are still at record lows. This means investors continue to have no choice but to look for better yields in the stock market. One place that has really caught investors' attention are oil and gas master limited partnerships, where the top four offer an average distribution yield of 9%.

The business of an oil and gas MLP is pretty straightforward. These companies acquire mature oil and gas wells, hedge to lock in the cash flows associated with those wells,Seems like need a bit more explanation of this middle part, but this could be just because I don't know the topic and then return nearly all of the excess cash flow to investors. That said, not all of these companies are that straightforward. This can make it difficult for investors to choose which one would fit best within their portfolio.

Some investors might want the security of owning top-dog LINN Energy (NASDAQ: LINE) or its affiliate LinnCo (NASDAQ: LNCO). The acquisition machine now owns an interest in 19,000 producing wells throughout the U.S. Not only that, but thanks to its most recent acquisition, LINN Energy's production is quite balanced and its distribution is now rock solid.

Still, other investors are more interested in upside that can be offered by smaller operations like BreitBurn Energy Partners (NASDAQ: BBEP), Vanguard Natural Resources (NASDAQ: VNR) , or EV Energy Partners (NASDAQ: EVEP). However, while all three are relatively the same size, there are major differences between each company. For example, BreitBurn Energy Partners' production is heavy on oil, while Vanguard Natural Resources and EV Energy Partners lean heavily toward natural gas.

These are just some of the differences between these top four companies. To take an even deeper look I've created the slideshow below to help investors decide which of these massive distributions belong in their portfolio.

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Guide to Oil and Gas MLPs Guide to Oil and Gas MLPs Presentation Transcript