MLPs: The Stealth Commodity Play
Jens Heycke submits:Many investors think of Master Limited Partnerships (MLPs) as interstate pipelines that operate like toll roads and are agnostic to commodity prices. The reality is that long-haul "toll road" pipelines account for less than half of MLP sector profits and many MLPs actually have substantial commodity price exposure. Obviously, MLPs like Linn Energy (LINE), that actually produce oil, gas, or coal have direct commodity exposure. But beyond these companies, the numerous MLPs involved in the natural gas liquids (NGLs) value chain have more exposure than many investors realize. The most exposed of this group are G&P MLPs, which gather and process natural gas - companies like Markwest Energy (MWE), Copano Energy (CPNO), and Targa Resources (NGLS). Many of these companies receive revenue in the form of the NGLs extracted during processing. Because of this, these MLPs are effectively long on NGLs. NGLs are substitutes for petroleum products in some typesComplete Story »
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