As a sector, oil and the natural gas industry offers interesting opportunities in different aspects of the trade. Arc Logistics Partners (NYSE: ARCX) and Marlin Midstream Partners (NASDAQ: FISH) are such attractively priced long-term opportunities that offer excellent growth minus the risk usually associated with exploration activities.
As the name suggests, Arc Logistics Partners offers energy logistics support to producers, distributors and sellers in the United States. The company generates revenues through terminalling, storage and throughput services. These multi-year contracts offer excellent revenue and earnings visibility and bring much needed stability in this capital intensive business.
The company is active in the East Coast, Gulf Coast, and Midwest regions and even though the capital requirements are quite high in the business, Arc Logistics has moderate debt equity ratio of 0.5. This moderate leverage allows profits to grow at a faster rate, case in point being the latest quarterly announcement which saw profits doubling. It is not that the company has got no pain points, in fact its strength of stable top-line is probably a weakness in itself as it limits the top-line growth prospects. However, it appears this is a fair tradeoff for an annualized dividend yield in excess of 6 percent. At current levels, investors also get the advantage of buying shares at more than 30 percent discount to book value.
Marlin Midstream Partners is another midstream energy player in the country. The stock has taken a breather after a fantastic run, but still trades near the 52-week high levels. However, by no means it is overvalued as the price earnings ratio of 15.3 would indicate. The reason behind this trend is the rapidly improving financial performance of the company. In the latest quarter ended June Marlin Midstream's top-line doubled to $22.5 million while it swung to a profit of $6.3 million, from a loss of $1.2 million in the same period last year. At the same time, its current market price of $20.9 per share puts a rather conservative multiple of only 13.5 on forward earnings.
If this is not compelling, sample the bullish stance of analysts at Wunderlich Securities which have raised their target price to $24 per share while maintaining the "Buy" rating. Even at the elevated price levels, the stock offers an excellent dividend yield of nearly 7 percent. The company's financial performance on almost all key metrics is above industry average even though the balance sheet is almost debt free.