An MLP Trio: Top Picks in the Oil Patch

08/07/2017 2:54 am EST

Focus: ENERGY

Briton Ryle

Editor, The Wealth Advisory

In our MLP portfolio, we've picked solid companies that will be able to weather the storm and come out on the other side more streamlined and with less competition. So, as the price of oil keeps climbing so will the prices of our stocks, notes Brit Ryle, editor of The Wealth Advisory.


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The BP Prudhoe Bay Royalty Trust (BPT) holds overriding royalty interest in minerals in the Prudhoe Bay oil field located on the Alaska North Slope.

BPT is a pure play on the price of oil. That means as oil rises in price, so does the payment per share. There’s good reason to estimate that prices will be as high as $70 a barrel by year-end.

And that would translate into annual payments of as much as $7. BP Prudhoe Bay Royalty Trust is a “Buy” on dips under $20. The 12-month target price is $30.

Crescent Point Energy Corp. (CPG) acquires, explores, develops, and produces oil and natural gas properties in Western Canada and the U.S. Over the past five years, CPG added more oil assets than any other company in North America. Now it’s time to grow production from those new assets.

The company has a break-even point around $45 per barrel on existing resources so even with prices below $50 a barrel, it can still make money. And for every $1 per barrel increase in price, it’ll have $50 million more in operational cash flows to put toward investments.

Plans are for an additional 670 new wells to come online this year. And management has 41% of its 2017 production hedged around $70 per barrel.

This is still a strong company in a strong industry and one of the best investments in the oil patch right now. I’m keeping Crescent Point Energy a “Buy” under $10. The 12-month target is $17.50.

Pattern Energy Group (PEGI) is a yieldco that buys power generation assets and gets a steady stream of income from the installation, which it uses to pay dividends and fund other purchases.

Pattern Energy has done nothing but climb so far this year. It’s up about 28% and should continue to rise. Earnings for the last two quarters were well above expectations.

Management is doing a great job of getting new projects online and completing current ones on schedule. I expect to see a continuation of these earnings beats and price appreciation all year.

Pattern Energy is still a “Strong Buy.” I’m so confident that we’re through the woods that I’m raising the limit entry price again to $25. And I’m boosting my 12-month target to $35.

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