grasshopper

Hey guys, New to the board but been lurking for a few months. Portfolio mostly in financials. I actually made my first real money in MLPs during the last time oil and gas prices tanked. In recent years, alot of MLPs have been floated and many are gonna be crushed with this drop in prices, especially many of the EP ones that are very sensitive to price movements. Since many investors invest in MLPs through an index, this may bring down a bunch of non-EP MLPs that have nothing to do with oil prices -> midstream players MLPs have to pay out their revenues in a pass through structure. Most MLP units are held by the sponsoring company and their insiders to retain control of the asset, the rest is floated to the market to raise capital for the parent. Midstream MLPs generally are pipeline, storage, and other midstream assets that are constructed and operated based on 10,15,20+ year Take or Pay shipping and/or use contracts (basically pay whether capacity used or not. Fee business) Easy to project out and do DCF, especially on smaller MLPs that envelope only a few assets, sometimes just even 1 primary asset. Last time I saw the oil prices crash and drag down MLPs, some midstream MLPs were yielding ridiculous amounts of cash distributions per year (30-50%) Had nothing to do with their contracts, just dragged down in the general crashing energy market. Catalysts basically are the distribution (which must be paid as a pass thru) or basically having the parent company of the MLP buy back the MLP (think EPD family of MLPs from Dan Duncan or Kinder Morgan family of MLPs) Usually happens in a pretty quick timeframe, within a year or so, especially for the obvious screaming bargains. If not bought back by the parents, look for massive insider buying from officers of the parent company or sponsoring company of the MLP. Best places to look are wherever there are huge families of related MLPs that has a parent with significant flexibility to buy them back. Anyways....we're not there yet in the MLP world...but just a place to watch as we see oil prices crash. Food for thought. not currently in any MLP, but watching....