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Which MLPs Could Continue Strong Distribution Growth in 2017?

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MLPs’ distribution

In this article, we’ll look at MLPs’ distribution trends. Out of 117 MLPs, 37 managed to grow their distribution while 68 MLPs kept their distribution unchanged until 3Q16. This includes the GPs (general partners) of limited partnerships and midstream C corporations.

Liquids pipeline and terminaling MLPs, which are involved in crude oil and refined products transportation and terminaling, saw the highest median distribution growth compared to other MLP subgroups. Liquids pipeline and terminaling MLPs include Valero Energy Partners (VLP) and Shell Midstream Partners (SHLX).

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Distribution cuts

Ten MLPs announced distribution cuts in 3Q16. Plains All American Pipeline (PAA) and Emerge Energy Services (EMES) are among the midstream MLPs that announced distribution cuts in the most recent quarter. Williams Companies (WMB), a C corporaton general partner, also announced distribution cuts to support its subsidiaries’ growth plans.

Plus, 22 midstream companies have cut their distributions since the rout in energy prices, including Kinder Morgan (KMI). Most of the MLPs that have cut their distributions either have high commodity price exposure, high leverage, or both.

This means ~80% of MLPs still managed to keep their distribution growing or constant since the rout in energy prices. Upstream MLPs have seen the most distribution cuts over the last couple of years.

2017 distribution growth guidance

EQT Midstream Partners (EQM), Magellan Midstream Partners (MMP), and Antero Midstream Partners (AM) are among the midstream MLPs with strong distribution growth guidance for 2017. For more details on EQM’s and MMP’s 2017 distribution growth plans, please read EQM to Continue Strong Distribution Growth in 2017 and Beyond and Magellan Midstream Partners Continues to Increase Distributions.

Midstream MLPs that are less likely to resume distribution growth in 2017 despite their strong distribution coverage include Boardwalk Pipeline Partners (BWP), Enable Midstream Partners (ENBL), and ONEOK Partners (OKS). This is due to their significant growth plans and high leverage.

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