Enable Midstream: A Favorite MLP

11/03/2014 8:00 am EST


Elliott Gue

Editor and Publisher, Energy and Income Advisor and Capitalist Times

Over the past three years, investors seeking differentiated returns have found recent initial public offerings in the MLP space to be a fruitful hunting ground, asserts Elliott Gue, editor of Capitalist Times.

Why do newly listed publicly traded partnerships tend to outperform? They often grow their distributions at an accelerated rate in their first two years as a publicly traded entity.

These rising quarterly payouts, coupled with a raft of positive research reports from Wall Street analysts, tend to attract investors’ attentions and drive the stock price higher.

One favorite is Enable Midstream Partners LP (ENBL). Despite completing its IPO in April 2014, Enable Midstream Partners LP already boasts $11 billion in total assets, making the MLP one of the largest midstream names that we cover.

Three established companies contributed assets to Enable Midstream Partners:

  • Oklahoma-based utility OGE Energy Corp. (OGE), which owns 55.4% of the MLP’s common units;

  • Electricity and gas transmission giant CenterPoint Energy (CNP), which owns a 23.6% equity interest; and

  • Private-equity outfit ArcLight Capital Partners, which holds an 11.3% stake.

Enable Midstream Partners’ gathering and processing business includes more than 11,000 miles of oil- and gas-gathering pipelines and 12 gas-processing plants.

Its geographic footprint includes established fields such as Arkansas’ Fayetteville Shale and Oklahoma’s Woodford Shale. More important, it also has exposure to up-and-coming plays such as the oil-rich South Central Oklahoma Oil Province.

In November of 2013, Enable Midstream Partners also started up an oil-gathering system in North Dakota’s Williston Basin, home to the Bakken Shale and other hydrocarbon-rich formations.

Enable Midstream Partners’ transmission and storage segment comprises eight storage facilities, 2,300 miles of intrastate pipeline, and 7,900 miles of interstate pipes.

All told, Enable Midstream Partners generates about three-quarters of its overall EBITDA from fee-based arrangements. Although this business mix implies a modicum of exposure to commodity prices, the backing of its sponsors—OGE Energy and CenterPoint Energy—mitigates this risk.

The MLP, on July 25, declared a prorated distribution of $0.2464 per unit for the second quarter of 2014. Management’s forecast calls for the MLP to deliver distribution growth in the low double digits over the next few years.

Enable Midstream Partners rates a buy up to $25.00 per unit for its above-average distribution growth and strong general partners. 

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