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Conference Thoughts: The Market Doesn't Give us Credit for...

|Includes: ACMP, Martin Midstream Partners L.P. (MMLP)

I attended the Wells Fargo 10th Annual Pipeline, MLP & E&P, Services and Utility Symposium in New York yesterday.  The conference was very well attended, plenty of fancy ties, smug faces and iPads.  I didn’t bring any of those things, but was still allowed in.

Tales of Wells Fargo, apparently a TV series in the late early 60s on NBC

The conference opened with an address from research analyst Sharon Lui, offering a review of the sector in 2011 and expectations for 2012.  She noted MLPs are outperforming again in 2011, although the highest flyers have been midstream c-corps, the result of E&P spin off plans (like WMB) and acquisitions (like EP and SUG).

Lui noted that Shale development, petro-chemical demand and high crude / NGL prices are all driving record investment in new projects.  Capital markets are wide open, with record debt and equity issuance in 2011, and a very robust IPO market.   Fund flows remain positive as investors seek high yield, new and creative products (ETFs, ETNs, mutual funds) continue to pop up to fill that demand.

Wells Fargo is projecting 7.3% yield and 7.4% capital appreciation (resulting from 6-7% distribution growth) for MLPs in 2012, so 14.7% total return.  They expect general partners and NGL focused gathering and processing MLPs to continue to outperform.

Later in the day, Bentek Energy’s President Porter Bennet had an interesting overview of the domestic production and commodity price picture.  He noted that natural gas production will continue to overwhelm demand and weigh on prices and differentials.  He said that would be the case unless about 30% of the drilling rigs currently operating in the country were to be laid down for some extended period of time.

Tim Fenn’s tax panel was also lively and interesting, particularly the statistics on who owns MLPs as collected by PriceWaterhouseCoopers K-1 processing group.  Lots of discussion about owning MLPs in tax-exempts despite the UBTI.

Company Presentations: What the market doesn’t get about us…

Oh, and there were also 4 tracks of company presentations, allowing for more than 50 MLPs to give presentations yesterday.  I’m still sifting through webcasts for MLPs I didn’t see.  But so far, what struck me watching these presentations was how management teams all have a boogeyman out there in the investment community they are chasing.  In other words, each MLP management team believes the market perceives them incorrectly and is missing the important part of their story... [read the rest here]


Disclosure: The information in this article is not meant to be financial advice, we are not your financial advisor and I am posting my comments for informational purposes only.