2 Juicy High-Yield Energy Plays

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 |  Includes: BBEPQ, MCEP
by: Bret Jensen

Long-time readers of my columns know that I'm a fan of Energy Limited Partnerships (LPS) and Master Limited Partnerships (MLPs) within my income portfolio. This is especially true now that the sector has moved down some due to rising interest rates. I think the country is in the early stages of an energy boom as domestic oil and gas production continues to ramp up at impressive rates.

Yesterday, Oppenheimer restarted coverage on the sector and is bullish for its inclusion into income portfolios. Here are two selections both I and Oppenheimer like at current valuations.

Breitburn Energy Partners (BBEP) is an oil and gas E&P concern organized as a master limited partnership which came public in 2006. The company has mature long-lived reserves and has grown through acquisitions as well as organic growth. One of the entity's most attractive features for income investors is its nearly 11 percent distribution yield (10.9%).

Revenues are growing rapidly with new acquisitions. The company should post a better than a 50% sales gain this fiscal year and analysts project another 30% or better gain in FY2014. In its last reported quarter, EBITDA rose almost 30% Y/Y. Consensus earnings estimates for both FY2013 and FY2014 have exploded to the upside in the past three months.

The median analyst price target for the 12 analysts who cover the stock is $21 a share, significantly above BBEP's current stock price of $17.30 given its yield. Stifel Nicolaus initiated the shares as a "Buy" in August with a $21 price target as well. Finally, several insiders bought over $800K shares in July.

Mid-Con Energy Partners, LP (NASDAQ:MCEP) develops and produces oil and natural gas from its properties in North America. Its properties are primarily located in Oklahoma, Texas and Colorado. The shares have a distribution yield near nine percent (8.6%) and the company has incrementally raised its payout since the company went public late in 2011.

Revenues are tracking for better than a 40% gain in 2013 and analysts project sales will increase some 15% in FY2014. MCEP is very reasonably priced given its yield at just over 11x times this year's expected earnings. The shares are going for just over $23 a share. Oppenheimer has a $28 price target on the shares and Robert W Baird recently put a "buy" on MCEP.

Disclosure: I am long BBEP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.