Portfolio Action Summary

• Exterran Holdings (NYSE: EXH) added to Growth Portfolio. Buy below $42
• Exterran Partners (NYSE: EXLP) added to Growth Portfolio. Buy below $34
• Global Partners (NYSE: GLP) added to Growth Portfolio. Buy below $50
• NGL Energy Partners (NYSE: NGL) downgraded to Sell in Growth Portfolio
• Genesis Energy (NYSE: GEL) upgraded to Buy below $53 in Growth Portfolio
• Spectra Energy Partners (NYSE: SEP) upgraded to Buy below $64 in Conservative Portfolio
• Targa Resources (NYSE: TRGP) upgraded to Buy below $135 in Growth Portfolio
• Williams (NYSE: WMB) upgraded to Buy below $59 in Growth Portfolio
• Sunoco Logistics Partners (NYSE: SXL) buy below target increased to $55 in Growth Portfolio
• GasLog Partners (NYSE: GLOP) buy below target reduced to $26 in Aggressive Portfolio
• UGI (NYSE: UGI) buy below target increased to a split-adjusted $45 in Growth Portfolio  
• Oiltanking Partners (NYSE: OILT) downgraded to Hold in Conservative Portfolio

Alliance Holdings (NASDAQ: AHGP)

The general partner and its coal mining MLP operating affiliate, Alliance Resources (NASDAQ: ARLP), delivered yet another quarter of strong results last month.

Coal sales tonnage was up 3.4%, pricing improved by 2.3%, while costs per ton fell 2.6%, all year-over-year. While the Illinois Basin remains the partnerships’ biggest producer and main growth focus, this time it was the Tunnel Ridge mine near Wheeling, West Virginia that delivered much of the upside, cranking up low-cost, high-price production. ARLP raised its EBITDA guidance for the year.

Founder Joseph Craft did warn of coal market weakness in 2015 as a result of the unusually cool summer that reduced electricity demand, as well as slumping coal exports. He also noted that utilities fearful of new environmental regulations now prefer to purchase their coal quarter by quarter. As a result, while production at Alliance’s newest mine will still quadruple next year, further expansion there will be delayed until demand improves.

But the partnership’s challenges, which also include railways clogged with oil and grain, shouldn’t be overstated. Consolidated distributable cash flow was up 28% year-over-year. That was more than enough to support a 10.5% year-over-year increase in AHGP’s distribution, for a yield of 5% at the current unit price.

The 8.5% increase in the distribution to ARLP limited partners still produced coverage of 1.75x. That makes it highly likely that Alliance will be able to continue increasing its payouts at a comparable pace well beyond next year.

More than 75% of next year’s likely coal production has already received pricing commitments, along with 55% or so of the plausible output in 2016. Craft said final pricing for 2015 should be only marginally lower than this year, in the neighborhood of 50 cents per ton, or less than 1%.

He also noted the partnership continues to consider “simplification” options given the convergence of the yields of AHGP and ARLP, despite AHGP’s stronger growth prospects as the harvester of generous incentive distribution rights from ARLP. The most obvious and practical simplification, in our opinion,  would be a buyout of AHGP by ARLP at a healthy premium.

The partnership’s balance sheet remains almost entirely unlevered, with debt at less than one year’s EBITDA, which puts it in a great position to pick up additional assets should highly leveraged competitors need to sell or go into bankruptcy. Curtailment of unprofitable production should also provide a boost to coal prices.

The unit price rose nearly 9% over the last month. Buy AHGP below $77.

AmeriGas Partners (NYSE: APU)

The leading propane distributor delivered on its forecast, increasing adjusted EBITDA 7.6% in the just completed fiscal year. Its guidance for 2015 is for a modest EBITDA gain of 1% to 5%, which management said would be supportive of its goal of continuing to grow the distribution 5% annually. The current yield of 7.6% is backed by solid 1.2x distribution coverage. AmeriGas has also whittled its debt-to-EBITDA ratio to 3.6, from 3.9 last year, according to its recent analyst day presentation.

With propane inventories at an all-time high and wholesale prices down significantly from a year ago, AmeriGas looks well-placed to continue to increase margins. Its 2015 guidance is typically conservative, and could yet surprise to the upside. The unit price was up 2% over the last month. Buy #8 Best Buy APU below $51.

Boardwalk Pipeline Partners (NYSE: BWP)

The immediate past and near-term future remain lean for the ailing interstate natural gas shipper, with adjusted EBITDA down 5% year-over-year during the first nine months of 2014, and distributable cash flow declining 18% on the same basis as a result of sharply increased maintenance spending and the toll from a number of one-time items.

At this point, given the cost of growth initiatives not expected to start generating returns until 2016 at the earliest, a dividend increase recouping some of the 81% reduction announced early this year doesn’t appear to be in the cards for next year.

Boardwalk has so far financed only about 15% of the looming $1.7 billion tab for growth projects it has planned over the next four years to make up for the drop in demand for south-to-north gas transportation and gas storage. The new initiatives include accommodating growing demand for the capacity to ship Marcellus and Utica gas south, to supply gas to a major LNG export project on the Gulf Coast and to provide transportation for the rapidly expanding chemicals industry in the same region.

In the meantime, after a relatively stable 2015 Boardwalk expects to lose more south-to-north revenue and profit the following year.

What keeps us interested is the low unit price barely covering the possibly understated book value, the promise of more north-to-south demand for Boardwalk’s pipes in the coming years and the possibility that gas storage fundamentals could improve if higher prices bring back wider seasonal differentials. Last but not least, Boardwalk seems like an obvious takeout candidate for a stronger midstream player better placed to execute its growth strategy.

The unit price is up 3% over the last month despite the scant 2.3% yield and unappealing fundamentals. Buy BWP below $19.

Buckeye Partners (NYSE: BPL)

The operator of storage terminals and pipelines moving crude and fuel reported third-quarter results much improved from three months earlier, when a proprietary trading loss left cash flow far short of what the partnership paid out in distributions.

This time around, distributable cash flow covered 99% of a declared distribution that increased 4.7% year-over-year, and distribution coverage would have been 1.04x without the units sold late in the period to finance Buckeye’s investment in a big new joint venture on the Texas coast.

That project, involving the acquisition of an 80% stake in a busy marine petroleum products shipping terminal, a condensate splitter under construction nearby and gathering systems in the Eagle Ford shale, makes Buckeye a key partner of the big global crude trader Trafigura, which has retained a 20% interest in the venture. Trafigura is likely to export big volumes of oil condensate, other petroleum products and possibly crude from the Corpus Christi facility. Buckeye expects the deal to be cash flow neutral next year but accretive 8% on a per-unit basis starting in 2016,supporting faster distribution growth.

The current yield is down to 5.5% after the unit price rallied 9% over the last month, reaching its highest point since the end of July. Leverage remains high at 4.5 times long-term debt to trailing adjusted EBITDA, though that should continue to improve as Buckeye continues to get more out of the terminal network it bought from Hess (NYSE: HES) last year. Until its distribution converge and leverage improve to standards we’ve come to expect from similarly yielding partnerships, BPL will remain a Hold  in the Aggressive Portfolio.

CVR Refining (NYSE: CVRR)

The variable-distribution refining partnership announced a payout of 54 cents per unit after reporting third-quarter results, which were hurt by a fire that put one of its refineries out of commission for nearly a month during the period. During the first nine months of the year, the MLP spun off by Carl Icahn has so far paid out $2.48 per unit, and even assuming the fourth quarter is no better than the third that would put its annual 2014 yield north of 12%.

CVRR can’t do much about this year’s softer margins and no refiner is immune from accident risk. But the partnership has done a great job of paying down debt and upgrading its refineries to improve long-term profitability.

The upgrades are continuing, financed largely out of cash flow, and CVRR is also beefing up its midstream operations with the stated goal of spinning them off into a separate MLP. Given predictable fee-based cash flow, such a spinoff would be very likely to garner a higher valuation multiple.

The unit price has inched up less than 1% over the last month. Buy CVRR below $26.

DCP Midstream Partners (NYSE: DPM)

One of the largest gas gatherers and processors reported strong third-quarter results powered by the performance of recent asset dropdowns. Processing plants in the Eagle Ford shale and the Colorado Rockies continued to hum, fueling strong demand for natural gas liquids pipelines linking those regions with the Gulf Coast.

Distribution coverage improved from the second quarter’s weak 0.84x to 1.23x this time around, pushing up 2014 coverage to 1.07x with a seasonally and anecdotally strong fourth quarter still to come.

The distribution rose nearly the promised 7% to a yield of 5.9% at the current price, which has declined 4% since we downgraded DPM to Hold a month ago. Most analysts on the conference call seemed impressed with the latest results but some, like us, appear to have at least some concern about the profitability of the partnership’s NGL production if crude remains weak relative to natural gas prices over the long haul, and if weaker crude cuts growth in the shale basins now supplying much of DPM’s volume increases.

These concerns are likely to diminish once crude prices bottom, but of course that could happen below current levels. In the meantime, DPM’s scale, solid yield and promising prospects should see it through.   

Delek Logistics Partners (NYSE: DKL)

The fast-growing refinery logistics partnership delivered an acquisition-aided increase of 32% in distributable cash flow year-over-year and raised its distribution 21% year-over-year, for a yield of 4.9% at the current unit price.

The distribution coverage was a strong 1.4x, and management reiterated plant to increase distributions at least 15% annually. With leverage modest at 2.5x debt/EBITDA, there’s room for additional acquisitions to hit those targets, starting with the planned dropdowns of a storage tank and a rail loading facility associated with the MLP sponsor’s refineries early next year.

Results were hurt on a sequential basis by reduced wholesale margins in West Texas, but that was largely expected as a competitor’s refinery came back on line. On the other hand, a new pipeline contract set to be signed in the coming weeks is expected to boost cash flow next year.

Delek Logistics remains a financially secure growth story with defensive characteristics thanks to its reliance of fixed long-term contracts. The unit price rose more than 4% over the last month. Buy DKL below $42.

Energy Transfer Equity (NYSE: ETE)

The general partner of a large family of MLP affiliates reported an 11% year-over-year gain in adjusted distributable cash flow. Early contributions from the long-term agreement financing the planned liquefied natural gas export terminal at Lake Charles, Louisiana, more than offset a management fee paid to an affiliate in connection with the project as well as a higher interest expense.

Last month, ETE kicked up its distribution growth another notch or two by hiking the quarterly payout 23.4% year-over-year, for a yield of 2.6% at the current unit price. The distribution coverage has slipped as a result to 1.04x, from 1.12x a year ago, but on the earnings conference call management hinted the distribution increases won’t be slowing down.

The partnership recently recruited Phillips 66 (NYSE: PSX) as a 25% partner for two pipelines that will carry Bakken crude to the Midwest and from there to the Gulf Coast. These are set to come online in late 2016.

Separately, ETE has proposed trading its 45% interest in the project to its Energy Transfer Partners (NYSE: ETP) affiliate, along with 30.8 million ETP units and cash consideration boosting the total value of the deal to $3.75 billion. In exchange ETE would get another 40% of general partnership interest and incentive distribution rights in Sunoco Logistics (NYSE: SXL), bringing its share of that profit stream to 90% and leaving ETP with 10%. The ETP units returned by ETE would then be retired, shrinking ETP’s unit count by approximately 9% and giving it more flexibility to invest in a heavy slate of approved growth projects. 

ETE has set itself a goal of becoming a pure-play general partner conducting all of its operations through affiliates, and presumably reaping a growing share of their profits via general partner incentives. This plan has an excellent chance of succeeding. The unit price is up 10% over the last month. Buy #4 Best Buy ETE below $66.

Energy Transfer Partners (NYSE: ETP)

The cash and equity ETP is scheduled to receive from ETE in their latest trade will come in handy given the busy slate of growth initiatives ETE has set before it, to the tune of $8 billion and up over the next three years.

The good news is that, at cash flow multiples of 6x – 8x that ETP expects to earn on these investments they should produce more than $1 billion of cash flow a year. The biggest splash will be the $4 billion or so for a new pipeline carrying Marcellus and Utica gas across Ohio and Michigan into Ontario, which has been fully subscribed for terms of 15 to 20 years. ETP will spend nearly as much on its share of the costs for the Bakken crude pipeline.

Most recently, ETP and another ETE affiliate, Regency Energy Partners (NYSE: RGP) unveiled a plan to build a new $1.8 billion natural gas liquids pipeline from the Permian Basin to the Mont Belvieu fractionation hub on the Gulf Coast. The partnership is also pushing ahead with new processing plants in the Eagle Ford and a new fractionator in Mont Belvieu. Included in its analyst day presentation was a chart suggesting that in all its key gathering basins crude drilling remains profitable above $65/bbl.

The latest distribution was up 7.7% year-over-year, and yields an annualized 5.8% at the current price, which is up 6% over the last month. Buy our top pick ETP while you still can below $70.

EnLink Midstream (NYSE: ENLC)

The general partner of EnLink Midstream Partners (NYSE: ENLK), the gathering, processing and logistics MLP affiliated with Devon Energy (NYSE: DVN) has been a relatively weak performer over the last month, its unit price slipping 1% in up-and-down action.

That could be because ENLK posted mildly disappointing third quarter results, its distributable cash flow covering only 95% of the declared distribution on one-time factors. Still, the distribution coverage for the year is expected to improve to “around 1.0x,” which should be sufficient to continue increases at a 5.5% annual growth rate.

The distribution coverage at ENLC, on the other hand, checked in at a robust 1.65x, and the general partner remains on track to exceed annual guidance for distributions of 80 cents per unit for the fiscal year.

ENLC units currently offer a 2.4% annualized yield based on the latest payout, and management has set a goal of growing them 20% annually in future years. This appears easily achievable based on both EnLinks’ exposure to Devon’s aggressive drilling program, multiple dropdowns from ENLC to ENLK slated for next year and the fact that ENLK’s next payout will entitle ENLC to 50% of its affiliate’s future distribution increases based on incentive distribution rights. ENLC is our #7 Best Buy below $44.

Enterprise Products Partners (NYSE: EPD)

By far the largest MLP by market capitalization, Enterprise reported a 14% year-over-year increase in quarterly distributable cash flow adjusted for asset sales, without the benefit of any acquisitions. The natural gas and natural gas liquids processor and shipper stuck to its recent pace by increasing the distribution 5.8% year-over-year, and managed to do so with 1.40x distribution coverage, which allowed it to retain $284 million for growth projects (and just over $1 billion in the last nine months).

The growth came from nearly $5 billion in capital projects placed into service over the last year, with next year’s start-up slate valued at $2.5 billion, followed by $3.5 billion in projects slated for completion in 2016.

Recent weakness in the price of energy liquids has so far manifested itself only in EPD’s decision to reject more ethane from its plants because of subpar margins, and concerns that it won’t find enough committed shippers for its proposed Bakken-to-the-Gulf crude pipeline. But like Energy Transfer’s management, EPD’s CEO said growth in output volumes continues apace in the Texas basins where it’s most active.

The unit price is up 2.7% over the last month, and could gain more near-term momentum once Kinder Morgan’s (NYSE: KMI) merger with its MLP affiliates closes next week. Since EPD is by far the most valuable MLP, its weighting in the widely tracked Alerian MLP Index could rise to nearly 18% in the upcoming rebalancing from a recent 16%, forcing additional buying by exchange-traded funds.

In other news, Enterprise persuaded Oiltanking Partners (NYSE: OILT) to accept its all-equity merger proposal by modestly sweetening its prior no-premium bid. Enterprise has already agreed to spend $4.4 billion to buy out OILT’s general partner.

The partnership also announced an expansion of its Eagle Ford joint venture with Plains All American Pipeline (NYSE: PAA) to extend a gathering system in the basin, double the capacity of the condensate pipeline connecting that system with Corpus Christi and to build a new deepwater terminal in that city. The project is expected to be completed in 2017, and would permit the joint venture to export minimally processed oil condensate from the new facility.

Enterprise’s vast pipeline of organic projects financed with retained earnings should permit it to meaningfully accelerate distribution increases once growth opportunities thin out. In the meantime, management’s deeply ingrained financial conservatism is a nice insurance policy for limited partners. This combination is what’s made EPD the #2 Best Buy below $42.50.

EQT Midstream Partners (NYSE: EQM)

The midstream services affiliate of leading Marcellus driller EQT (NYSE: EQT) reported a 16% increase in adjusted third-quarter operating income pro-forma for its gathering system acquisition earlier this year. Without adjusting for the effects of the acquisition, distributable cash flow slightly more than doubled year-over-year, while the unit count increased 36% in a year’s time.

EQT continued to increase its quarterly distribution by three cents per unit, as it intends to do through the end of 2016, and this time around that was still good enough for a 28% payout jump over the last year. Despite the big increase, the distribution coverage was a bulletproof 1.65x, and net debt is still modest at 1.5x this year’s forecast EBITDA.

More borrowing and unit offerings are coming down the pike, because EQT intends to sell to EQM its remaining midstream assets, consisting mostly of gathering systems, over the next two years. EQT will also hand off to EQM its majority stake in a joint venture planning a 300-mile, $2.5 billion (at a minimum) pipeline that would bring EQT gas from West Virginia to southern Virginia and from there via third-party pipes elsewhere in the Southeast, where demand is growing and prices are higher. The pipeline, which already has  firm 20-year commitments for shipments of 2 billion cubic feet a day, would enter service in late 2018.

With all these projects on tap alongside with organic expansion, the current 2.4% yield would rise to 3.4% in two years’ time so long as EQM kept its promises and the unit price didn’t rise. And that’s just not tempting enough for us to recommend buying of an MLP that’s returned more than 100% for us over the last 15 months, yet trades below its price when we recommended selling half the position five months ago.

Note too that the quarterly distribution has now crossed the threshold at which the sponsor will be entitled to half of future growth without putting up any of the capital. That will become a drag on returns in short order, and I’ll address this issue in more detail and suggest a remedy in the next issue of MLP Profits. For now, EQM remains a Hold.

GasLog Partners (NYSE: GLOP)

The big news of the quarter for this partnership sponsored by LNG shipper GasLog (NYSE: GLOG) was its first vessel acquisition from its parent, the two ships added increasing its fleet to five LNG carriers. The Three ships owned by GLOP since its May initial public offering produced 125% more cash flow than was needed to pay the minimum quarterly distribution, not counting the shares issued just before the period’s end for the additional vessels. That offering raised $136 million toward the two ships’ $328 million purchase price, set at an EBITDA multiple of 9.5.

The five ships are fully booked with LNG giant BG Group (London: BG) through 2017, and three of the charters only expire in 2019-2020. The volume of LNG projects coming on line in that time frame and GasLog’s strong relationship with BG suggest the fleet won’t have trouble finding employment thereafter. Management remains bullish almost without reservation both on the LNG markets in the long run and on the dynamics of LNG shipping and recent spot rate trends.

But that didn’t stop analysts questioning the managers repeatedly about any signs that lower crude prices have undermined those fundamentals. They were only echoing the concerns of the investors who’ve discounted the unit price 10% over the last month, and a stunning 37% from its July 1 peak.

Management’s promise to seek a 15% distribution increase from the board in the fourth quarter hasn’t impressed the market much lately, just like the pledge to deliver growth of 10% to 15% in future years. If the distribution does increase 15% in the near term, the annualized yield at the current price would rise from 6.4% to 7.4%.

Barring a further slump in crude prices, the selling seems overdone, a mirror image of the nearly unchecked enthusiasm GasLog Partners garnered during its first two months as a publicly traded partnership. At some point, sentiment might even swing back toward valuing it as a growth story once again. Buy GLOP below the reduced target of $26.    

Genesis Energy (NYSE: GEL)

The pipeline operator as well as refinery and crude logistics player reported another quarter of improved results, as newly constructed offshore pipelines began earning minimum fees ahead of next year’s expected ramp in volume, crude gathering and the barge business acquired last year made their contribution, the cost of caustic soda used in refinery operations declined and Genesis continues to shrink a money-losing operation that once shipped bunker oil to Asia.

The offshore pipelines and cost savings on fuel oil storage commitments should add to the bottom line next year as well, as will the crude logistics complex Genesis is building for an ExxonMobil (NYSE: XOM) refinery in Baton Rouge, Louisiana, and a deepwater marine terminal in the same city also expected to become operational next year. Genesis recently purchased a US-flagged crude tanker for $157 million with the stated goal of expanding its marine logistics capabilities, though the ship is fully chartered into 2020.

The predictable 11% year-over-year increase in the distribution took the yield to an annualized 4.8% at the current price. The distribution coverage in the latest quarter was 1.12x, and would have been 1.18x but for an equity offering late in the period. Debt leverage before adjustments for projects not yet operational remained high at more than 4.5x recent EBITDA, but should come down next year as pipeline and logistics flows picks up.

Management was at pains to explain how little Genesis depends on high crude prices for its business, pointing out that it’s much more tied to the health of refiners. Yet the unit price has dropped 2% over the last month and remains down 14% since early September.

The jitters look misplaced, and the yield is finally high enough, and the direction of the business encouraging enough, to hope that the rapid distribution growth will force a higher unit price sooner than later. We’re upgrading Genesis to a Buy with that scenario in mind. Buy GEL below $53.

Holly Energy Partners (NYSE: HEP)

The refinery logistics MLP sponsored by HollyFrontier (NYSE: HFC) reported a 4% increase in distributable cash flow from a year ago and increased its quarterly distribution by 6.1% over the same span. That was good for a 6% yield at the current price, and HEP’s 40th straight distribution increase since its IPO was backed by a strong distribution coverage of 1.49x.

With several recent expansion projects completed and pipeline volumes up 10% or so year-over-year, the partnership continued to target an annualized EBITDA increase of $30 million by early 2016, which would constitute a 14% percent improvement on the recent run rate.

The unit price was flat over the last month, fading ahead of the quarterly results and then recovering. Holly Energy Partners’ solid yield is protected by long-term, fixed-fee contracts with its shareholder-friendly sponsor. Buy HEP below $40.

Kinder Morgan (NYSE: KMI)

The midstream giant’s shareholders and its MLP affiliates’ limited partners have just approved the entities’ landmark merger into a single company with a tax-shielded dividend and much more rapid growth than the MLPs could manage while paying out hefty distributions and rich incentive distribution rights.

Kinder Morgan Partners (NYSE: KMP) and El Paso Pipeline Partners (NYSE: EPB) will cease trading after Nov. 26, their units exchanges for a combination of cash and (mostly) KMI shares. The unified KMI has pledged to pay a $2 per share dividend next year, which works out to a 5% yield at the current price.

KMI has plans to increase that payout 10% in each of the next five years, while earning enough to produce a 10% cushion in distribution coverage. But the merger will leave it heavily in debt to the tune of 5.6 times its 2015 EBITDA.

Speculation about selling by MLP limited partners and index tracking managers after the merger has been replaced recently by predictions that merger arbitrageurs who’ve shorted KMI shares will have to cover. But in truth no one really knows where the price will go once the total number of KMI shares more than doubles and ends up in the hands of former MLP investors.

What we do know is that the tax advantages Kinder Morgan secured at the expense of its MLPs’ limited partners, and the savings it will realize in the coming years on lower payouts to investors, will give it much more flexibility to deliver growth. The MLP investors were bought out after a protracted period of underperformance based on temporary factors; their loss should turn into a gain for shareholders. Buy KMI below $45.

Magellan Midstream Partners (NYSE: MMP)

The leading shipper of refined fuels once again reported quarterly results above expectations, with higher transport volumes and tariffs adding up to a 30% gain in distributable cash flow year-over-year.

Remarkably, Magellan accomplished this growth without the benefit of share offerings and with only one modestly sized acquisition, though its long-term debt did rise by 23% to $3 billion over the last nine months.

The third-quarter distribution jumped 20% year-over-year, with coverage of 1.21x for the quarter and 1.45x expected for the year and a yield of 3% based on the current unit price. The partnership has promised an increase of 15% next year.

 Although refined fuel shipments account for the bulk of the current profits, much of the recent growth comes from growing investment in crude pipelines linking the Permian Basin and other drilling hubs to the refineries on the Gulf Coast.

With retained earnings financing a lot of these investments and no incentive distribution rights diluting returns, Magellan offers an attractive mix of prudent, limited partner-friendly growth.

The unit price climbed 12% to a record over the last month. MMP is our #3 Best Buy below $90.

MarkWest Energy Partners (NYSE: MWE)

The Marcellus and Utica gas processing champ reported a 66% year-over-year surge in distributable cash flow on a 52% increase in processed volumes as production in the world’s busiest shale gas basins continued to swell. Share offerings needed to finance MarkWest’s construction spree boosted the share count by a third over the last year.

The partnership continued to increase its distribution by a penny a quarter and a little less than 5% a year, and the units now yield an annualized 4.7%.

MarkWest said payout growth would pick up to 7% in 2015 and 10% in 2016. Distributable cash flow is forecast to rise 22% next year. Some of that will undoubtedly be offset with more equity offerings, because the capital spending over the next two years isn’t slowing down from this year’s pace of $2 billion or more, roughly double next year’s EBITDA guidance.

Still, leverage recently slipped from 4.6x to 4.4 debt/EBITDA, while the distribution coverage improved from 1.05x and 1.04x the last two quarters to 1.19x for the latest period.

MarkWest remains the premiere midstream play on the development of the fastest growing shale basins in the US, and trades accordingly. The price has risen nearly 7% over the last month, even as the partnership has been selling equity at the market to pre-fund its 2015 spending needs. MWE is the #6 Best Buy below $77.

Navios Maritime Partners (NYSE: NMM)

I have now listened to the dry bulk and container shipper’s third-quarter conference call three times, which means I heard Chairman and CEO Angeliki Frangou assert at least nine times that the partnership’s 2015 dividend is secure and that in fact the 39% of the capacity still available for next year can be rechartered without loss of cash flow at current market rates.

Perhaps Morgan Stanley analyst Fotis Giannakoulis only heard the message three times, including once in response to his own question. Perhaps he believes Frangou is lying, or deluded.

I have no other explanation for how one could listen to the same call (you can do it here) and come away convinced, as Giannakoulis sounded in downgrading NMM to Underweight with a $13 price target, that “NMM’s distribution capacity declines as current dividend far exceeds earnings, charters roll over at lower levels and coverage ratio is below 1x.”

It’s true that the formal distribution coverage for the quarter was at 0.73x, but on a pro-forma basis adjusting for the two container ships acquired during and immediately after the quarter and for leftover capital from February’s secondary offering that’s not yet been deployed, the coverage improves to 1x. And even without any pro-forma adjustments, distribution coverage over the last nine months stands at 1.21x, meaning Navios covered its payouts with 20% to spare.

Frangou said distribution coverage of 1.1x, based increasingly on long-term container charters rather than just the dry bulk carriers that used to account for all of NMM’s revenue, would be sufficient to consider a distribution hike.

Here’s a direct quote from her: “…Our open base [i.e., unbooked capacity — IG] for 2015 it is really at current market and we can easily charter out a vessel at that rate or above. So the distribution is really looking very nicely for the next two years.” It’s hard to understand how one gets from that  and the partnership’s health distribution coverage over the last nine months to claims the distribution is unsustainable.

Frangou isn’t some quack. She’s steered NMM through the collapse of global shipping rates with verve and skill over the last five years, buying a lot of extra time with a move into container shipping to wait out the slump and the related glut of merchant ships.

Surveying current rates on NMM ships coming off charter over the next year against the current spot market suggests that even if the cash flow gets dinged in the rechartering the ding should end up pretty modest, especially given the growing cushion of the longer-term container charters.

Moreover, NMM has retained the financial flexibility to continue adding container ships to meet its goal of ultimately getting as much as half its profits from that shipping sector, up from less than 30% currently.

The recent downgrades by Morgan Stanley and Stifel Nicolaus come after a sharp decline in the unit price (and similar moves in the share prices of other bulk shippers) on worries that China’s slowing growth will undermine its imports of iron ore and coal, along with the business prospects of dry bulk shippers.

I’d put more faith in Frangou, who sees continued strong long-term shipping demand, improving fleet fundamentals tied to rising scrappage of older vessels and a long-term advantage for NMM, which enjoys a lower cost of capital than many of its rivals and significantly lower operating costs well.

At a current yield of 13.2%, fairly secure through at least the end of next year, NMM trades like an inexpensive, income-producing option on a shipping recovery that may well materialize down the line. And even if it takes a while, consider that, beyond the busy rechartering stretch looming over the next 12 months, NMM currently has only a single charter expiring in 2016-17.

At worst, this is a generous yield that’s likely to continue delivering predictable income. After an 18% drop over the last month, the unit price is so low that a decent rebound could turn a double-digit yield into an afterthought. Continue buying NMM below $17.70, the level at which the current distribution would deliver a yield of 10%, and a capital gain of more than 30% from recent levels.

NGL Energy Partners (NYSE: NGL)

Adjusted EBITDA for the diversified and acquisition-bent logistics provider jumped an acquisition-aided 67% year-over-year, and the partnership stood by its forecast of $425 million in EBITDA for the fiscal year ending in March. NGL also reaffirmed plans to deliver an 18% distribution increase in calendar 2014 followed by 10% annual gains in subsequent years. That’s the good news.

So why are we dropping the partnership from the portfolio just as it’s surged back into the plus column since our May recommendation?

Because figuring out where NGL’s various businesses stand at any given point in time is too hard, and given large commodity price and inventory fluctuations divining the true picture of operating cash flow for the partnership as a whole is even harder. Management does not make this chore any easier by failing to provide verifiable estimates of distributable cash flow on a quarterly basis that can be compared with NGL’s distribution.

The serial acquisitions make the enterprise even less transparent. And it’s OK to have a too hard pile. NGL Energy Partners is not only too hard, it’s very exposed to short-term and long-term commodity fluctuations, so much so that its current 6.2% yield really doesn’t seem like such a bargain.

As for EBITDA, it won’t tell you that NGL’s interest costs have grown dramatically over the last year, to nearly four times the value of operating income in the most recent quarter. Not will the overall results reveal that in the crude logistics business profits recently vanished as a result of dropping crude prices and regional differentials.

If you enjoy volatility, believe in the recent momentum and like the fact that the CEO spent $633,000 in the open market a week ago, by all means stick with the program. But we’ve had enough, and worry that further commodity volatility could hurt NGL badly, not least because the fastest growing current business is water disposal for oil drillers, which obviously depends on the pace of drilling and therefore on the outlook for crude prices.

There are larger, steadier,  more secure and transparent MLPs out there yielding as much, and relying less on borrowing for acquisitions. We’ll be concentrating on those. Sell NGL. 

Oaktree Capital (NYSE: OAK)

The leading manager of distressed debt fund for the world’s largest institutional investors reported a 60% drop in adjusted net income and a 14% decline in distributable income, both metrics per class A unit, as realized incentives dropped based following the liquidation of a particularly profitable fund a year ago.

Oaktree declared a variable distribution of 62 cents per class A unit for the third quarter, and has now paid out $3.15 per unit over the last four quarters, for a trailing yield of 6.8% based on the current price.

It’s also continued to position itself to profit from the next crisis by growing assets under management 2% over the last three months and nearly 17% in a year. In September, Bloomberg News reported that the firm was raising a new $10 billion fund it would only begin to deploy when the next crisis produced the credit liquidation sales it craves.

The unit price had marked time over the last two month, and remains too low for a partnership with a very strong balance sheet and top-notch client roster and franchise value.

Given the current yield, investors in Oaktree are being fairly compensated while they wait for the next global series of unfortunate events to strike. Buy OAK below $52.

Oiltanking Partners (NYSE: OILT)

The partnership will cease trading sometime in early 2015, when its all-equity merger with Enterprise Products Partners (NYSE: EPD) is expected to be consummated. The exchange rate will be 1.3 EPD units for every unit of OILT, a 5.6% premium over the original no-premium offer made by the Enterprise in September, after it acquired OILT’s general partner. Limited partners should hold until the exchange, as it will permit them to assume a stake in EPD without triggering a tax bill. That’s not a small consideration considering that OILT returned more than 200% since it was added to the Conservative Portfolio just two years ago. Hold OILT until the merger closes.

Plains All American Pipeline (NYSE: PAA)

The top U.S. crude shipper reported strong third-quarter results, boosted by surging volumes of oil from new Texas wells and favorable timing shifts that likely borrowed some business from the fourth quarter. Distributable cash flow was up nearly 12% in a year’s time, versus a 7.5% rise in the number of outstanding units.

The distribution rose 10% year-over-year, with 1.02x distribution coverage for the quarter and 1.11x expected for the year. The current annualized yield is 4.9%. The unit price was down 2% over the last month as investors sweated the effect of lower crude prices on PAA’s crude gathering and logistics business segment in particular.

Those concerns were echoed by management in a cautious forecast for 2015, which anticipated a slowdown in drilling and narrower differentials in projecting EBITDA growth of 11.5% next year. That’s still expected to power distribution growth of 8.5% to 11.5% in 2015.

Some of the growth will come from the recently announced $1.1 billion acquisition of a 50% interest in the recently completed BridgeTex Pipeline, which will send crude from the Permian Basin to Houston. To acquire the stake from Occidental Petroleum (NYSE: OXY), Plains arranged to let Occidental sell its stake in its general partner, Plains GP Holdings, before the end of the lockup expiration period. It also agreed to have the BridgeTex sell cheaply to its other half-owner, Magellan Midstream Partners, the short southern extension of the BridgeTex linking Houston with Texas City.

Other projects announced recently include a major expansion of the Eagle Ford gathering and condensate processing joint venture with Enterprise Products Partners, complete with a new marine terminal at Corpus Christi; a crude pipeline between Cushing, Oklahoma and a Valero (NYSE: VLO) refinery in Memphis; and a crude pipeline running from southern Oklahoma into eastern Texas.

Plains’ top-notch management and unrivaled crude transport footprint leave it well placed to weather the current slump in prices and to benefit over continued growth in North American output in the long run. Buy PAA below $67.     

Plains GP Holdings (NYSE: PAGP)

The general partner of Plains All American raised its quarterly dividend 28% year-over-year in line with its forecast, and projected a 26% increase in 2015. The current yield stands at 2.8%. The share price dropped 4% over the last month, and Occidental’s secondary offering of 69 million shares increased the publicly traded float by approximately 50%, adding to the volatility.

PAGP’s harvest of incentive distribution rights from PAA increased by more than 30% over the last year and should continue to grow rapidly since it’s entitled to 50% of future PAA distribution increases . PAGP shares provide leveraged exposure to one of the strongest and best managed MLPs, with a current yield that looks generous given the projected rate of dividend increases. Buy PAGP below $33.

Regency Energy Partners (NYSE: RGP)

The gathering and processing MLP affiliated with general partner Energy Transfer equity doubled its EBITDA year-over-year thanks to some $7.5 billion in acquisitions in that time. Over the last year it has acquired the Marcellus and Mid-Continent gas gatherer and processor PVR Partners, Eagle Rock’s (NASDAQ: EROC) midstream infrastructure in the Texas Panhandle and East Texas, and Hoover’s gathering and processing assets in the Permian Basin.

Distributable cash flow increased 87% year-over-year in the third quarter, while the unit count rose 89% as Regency issued $5 billion of equity so far in 2014 to finance the acquisitions. It also issued or took over $3.9 billion of debt, nearly doubling the total outstanding to $6.4 billion. On a pro-forma basis, debt/EBITDA stood at a stretched 4.74x at the end of the period, above the partnership’s targeted range of 4.0x to 4.25x.

The most recent distribution represented a 6.9% increase year-over-year. Distribution coverage was 1.01x in the latest quarter and 1.00 over the last 12 months. The unit price dropped 4% over the last month, and now represents an annualized yield of 6.8%.

The recent acquisitions have dramatically expanded Regency’s reliance on gas gathering and processing, mainly in the fast-developing drilling basins in Texas, Oklahoma and Pennsylvania. Its ownership of a 50% of the Lone Star venture with Energy Transfer Partners provides exposure to the booming business of transporting NGLs from these basins to the Gulf Coast and processing them into liquefied purity products.

On the most recent conference call, management said it has upgraded its target for annualized savings from the recent mergers to $80 million, with more to come. But it remains to be seen whether this year’s deals will prove accretive to limited partners. So far, distributable cash flow per unit has been flat, while debt has mushroomed.

The partnership’s opportunities are large, but its balance sheet and distribution coverage are not the strongest, and must still absorb $1.5 billion in organic growth initiatives planned for next year. Until the financial metrics improve, RGP remains a Hold.

SemGroup (NYSE: SEMG)

The crude pipelines operator and natural gas processor reported especially strong third-quarter earnings, with EBITDA up 38% from the second quarter and 52% year-over-year. Rising demand for its recently expanded pipeline carrying crude from Colorado to Oklahoma and for its four Oklahoma gas processing plants left SemGroup on track to top its annual profit guidance.

On the ensuing conference call, CEO Carlin Conner said the company is looking for acquisition opportunities, notably in refinery logistics along the Gulf Coast, and is also pursuing midstream opportunities in Mexico, where SemGroup has long operated 14 asphalt plants, in conjunction with  that country’s recent energy reforms.

Meanwhile, SemGroup plans to drop down the remainder of its crude business to the Rose Rock Midstream (NYSE: RRMS) MLP it sponsors in the first quarter of 2015. RoseRock already operated the Colorado-to-Oklahoma White Cliffs pipeline as well as the Glass Mountain crude pipeline in  Oklahoma and a crude gathering business in the Bakken. After the crude dropdown, SemGroup will aim to sell to Rose Rock its four Oklahoma gas plants, booming thanks to soaring gas production out of the Mississippi Lime, as well as four larger plants in Western Canada.

SemGroup increased its dividend 11% from the prior quarter and 43% year-over-year, for a current annualized yield of 1.5%. Even so, dividends accounted for only about 22% of the quarter’s cash flow. That leaves the company well placed to continue hiking its payout rapidly next year, while retaining the bulk of its earnings to invest in new ventures.

The stock has rebounded 6.5% over the last month, recouping more than half its losses from the first half of October related to the slump in crude prices. And it has still returned a total of 18% since our June recommendation. With all of its key business segments recently performing above expectations based on rapid development of the basins where SemGroup operates, the future looks bright. Buy SEMG below $82.

Spectra Energy (NYSE: SE)

When we recommended gas transporter and processor Spectra Energy last month we noted that the pace of dividend growth could pick up given the ample cash flow coverage. And now it has, with Spectra lifting its payout 10.4% from the pace that prevailed for the first three distributions of 2014, which had been up 9.8% from 2013.

The declared dividend was more than 5% higher than quarterly distributable cash flow, which only rose 4.4% year-over-year. But over the first nine months of 2014 distributable cash flow was up 17% from a year earlier, and coverage for the full year remains on track to finish at a strong 1.50x, ahead of guidance nine months ago.

Higher costs of turnarounds at Canadian processing plants weighed on the results, as did weakness in the Canadian dollar, since Spectra derives just over a third of its profit north of the border.

On the other hand, the company’s sponsored MLP, Spectra Energy Partners (NYSE: SEP), was a source of strength, thanks to projects exploiting its extensive gas pipeline network stretching from the Gulf Coast into the Northeast.

One recent addition can now deliver enough gas to heat 2 million homes into New Jersey and Manhattan, high-value markets where winter prices often soar far above the national average. Another connected the mainline to Marcellus gathering systems in order to transport gas southward toward the Gulf — a trend that is becoming increasingly important for Spectra.

A crude pipeline running from Alberta through Wyoming into Illinois and two natural gas liquids pipelines connecting the Permian, Eagle Ford and mid-Continent production areas to the Gulf Coast also saw strong traffic.

The company began work on another $2.7 billion in growth projects this year as part of its drive to line up $35 billion in investments over the eight years ending in 2020.

It continues to build east-west extensions off its main north-south gas transmission line in the east to capture pockets of demand, and its distribution pipes in Western Canada could become more valuable if the region ends up hosting some of the many LNG projects currently in the planning stage.

The stock is up nearly 4% over the last month but still yields 3.8% following the dividend hike. Buy SE below $42.

Spectra Energy Partners (NYSE: SEP)

See above for a list of factors that drove the MLP’s excellent third-quarter results. Distributable cash flow nearly quadrupled following a massive dropdown of US gas transmission assets late last year, while the unit count only rose 155% over the same span. Debt increased by $2.4 billion to $6 billion largely as a result of the dropdown transaction. The distribution per unit continued to rise by a penny per quarter, equivalent to a 7% annualized rate and up 11.6% from a year ago, before the big dropdown. The distribution coverage was 1.45x on distributions declared after the quarter and is expected to be 1.20x on payouts for the year. The unit price rose 4% in the last month and now offers an annualized yield of 4.1%.

With several large and lucrative projects coming online in the years ahead, growth doesn’t seem likely to slow down. We’re upgrading SEP to a Buy below $64.  

Sunoco Logistics Partners (NYSE: SXL)

The crude, liquids and refined products mover and trader delivered another quarter of typically robust results, lifted by stronger crude marketing margins and the surge of trade through its Nederland crude and products marines terminal on the Texas Gulf Coast.

The distribution continued to rise 5% every three months (and 21% year-over-year) with distribution coverage a fat 1.57x over the last nine months.

But the big news was formal approval of a project dramatically expanding propane, butane and ethane exports from the partnership’s Marcus Hook terminal on the Delaware River south of Philadelphia. Propane exports from Marcus Hook are set to start on the modest scale next month, but the Mariner East 2 expansion would increase nearly sevenfold the maximum capacity Mariner 1 is expected to reach next summer.

With NGL production surging in the Marcellus (and soon the Utica) shales to the west, Sunoco has plans to turn Marcus Hook into the east’s answer to Mont Belvieu, the leading NGL processing hub on the Texas coast. Mariner 2 will cost a hefty $2.5 billion, to be financed largely by the (so far four) committed shippers signing up for 15-year fixed-fee contracts. Sunoco is also in talks to develop chemical industries on and around the site taking advantage of cheap supply of propane feedstock. In particular, its planning a large propane dehydrogenation (PDH) plant to make propylene, a key ingredient for the plastics and resins that surround us.

The partnership wouldn’t disclose the NGL volumes currently committed to Mariner 2, not would it break out the expected return on the project. But overall it continues to target a cash earnings multiple of 6 on its organic investments. But of course the incentive distribution rights owed on future growth to Energy Transfer Partners and Energy Transfer Equity turn a 6 multiple into an effective 12 for SXL’s limited partners.

For now, that’s plenty good enough given Sunoco’s rapid growth rate. And affiliation with the Energy Transfer family is showing benefits as well, as it funnels energy flows to Nederland and other Sunoco facilities. Sunoco is also interested in investing in Energy Transfer’s Bakken to the Gulf crude pipeline.

The unit price rallied following the results and the Mariner 2 announcement and is now at a record high, regaining (mostly) 12% over the last month. The yield is now at 3%, but at the current distribution growth rate would be above 5% within three years at this price. Debt leverage is moderate at 3.2x EBITDA, though that’s expected to rise as high as 4x over the longer term.

This large and diversified growth platform remains a must-own for at least the next few years. We’re increasing the buy below target on #5 Best Buy SXL to $55.

Targa Resources (NYSE: TRGP)

The general partner of a fast-growing LPG exporter, gas processor and crude gatherer reported strong consolidated results keyed by booming shipments of propane and butane from its Houston terminal, rising volumes of natural gas flowing into its processing plants and surging profits from its NGL fractionation base at Mont Belvieu, second only to that of archrival Enterprise Products Partners.

Adjusted earnings consolidated with operating affiliate Targa Resources Partners were up 58% year-over-year, supporting a dividend increase of 6% from the prior quarter and 29% year-over-year. But the rising cash tax rate at the GP level meant TRGP paid out the entirety of its receipts from NGLS.

That’s where the company’s pending acquisition of Atlas Energy (NYSE: ATLS) (and of Atlas Pipeline Partners (NYSE: APL) by NGLS) come in. Targa has said the deal, expected to close in the first quarter, will lower its effective tax rate on distributable cash flow at the GP level from an estimated 33% in 2014 to a range of 10% to 15% next year.

That, in turn, is expected to power a 35% dividend increase next year as Targa’s gathering and processing profits continue to benefit from development of the Permian and the Bakken. Toward that end, the partnership will be investing an estimated $600 million in two new gas processing plants in those basins. And it continues to add fractionation capacity at Mont Belvieu.

The unit price is down 5% over the last month, but the 2.4% yield remains an attractive down payment on profit leverage via incentive distribution rights (IDRs). After recommending taking partial profits at a 9% premium to the current price in June, we’re upgrading TRGP to a Buy below $135.    

Targa Resources Partners (NYSE: NGLS)

Targa’s MLP affiliate increased its own distribution 9% year-over-year, and still managed 1.47x distribution coverage. The yield is now 5.4% and the unit price is down 9% in a month and 17% since we recommended taking partial profits. Although the Atlas deal is expected to lift distribution growth to a range of 11% to 13% next year, the drag from IDRs leaves us recommending a Hold on your remaining stake, preferring TRGP’s lower yield but higher growth leverage and greater upside from a repeat merger bid as the general partner.     

TransCanada (NYSE: TRP)

The Canadian energy shipper and power producer  with interests stretching into the U.S. and Mexico reported quarterly results largely flat against a year ago, as a slump in power prices in western Canada offset stronger gas transmission revenues and growth associated with the Gulf extension of the Keystone crude pipeline and a Mexican gas expansion project.

With its proposed Keystone XL cross-border pipeline still stymied by opposition from the Obama Administration and a case now before the Nebraska Supreme Court, TransCanada affirmed its continuing interest in the project, even as the delays have boosted the estimated project cost from $5.4 billion to $8 billion (Canadian, as are all the dollar figures for TRP). The company has already spent $2.4 billion backed by long-term shipping contracts. The cost sharing arrangement on the deal allows 75% of any cost overruns up to the current estimate to be recouped from increased shipping rates, with TransCanada on the hook for the rest. Above $8 billion in total cost, further overruns would be split 50/50.

While Keystone XL has been hogging attention in the U.S., TransCanada last month filed for regulatory approvals for an even costlier project to bring Western Canadian crude into Eastern Canada along a converted gas line. The Energy East Pipeline would cost some $12 billion and be in service in late 2018. To minimize public opposition to the project TransCanada has had to commit to keep delivering the same quantities of gas to Eastern Canada.

The company is also eyeing expansion opportunities in Mexico, including those in power generation.

The dividend, currently growing at a predictable two cents per year, offers a current yield of 3.4%. The share price has rebounded 7% over the last month but remain well short of record highs reached before crude slumped.

TransCanada remains committed to dropping down its US transmission assets to an affiliated MLP, and management said the Keystone system could be dropped down at some point. But it hasn’t committed to a schedule of such asset sales, and appears committed to the power generation business some activist investors have urged the company to sell. Buy TRP below $62.

UGI (NYSE: UGI)

The gas distributor, LPG merchant and general partner of AmeriGas (NYSE: APU) reported a 26% increase in adjusted net income per share for the recently concluded fiscal 2014. Gains in gas distribution and the midstream & marketing segment more than offset a decline in its European propane business.

After benefiting from the unusually cold winter of 2013-14 in Eastern U.S., UGI expects a growth pause in 2015, forecasting adjusted income per share of $1.88 to $1.98, down from $1.99 in 2014.

But weather fluctuations aside, UGI continues to add gas customers across its service footprint in eastern and central Pennsylvania, and to benefit from opportunities to capitalize on the abundant nearby supplies of Marcellus gas.

Notably, it will be the project manager and pipeline operator, with a 20% stake, of the recently announced $1 billion PennEast Pipeline project to bring Marcellus gas into southeast Pennsylvania and central new Jersey by 2017. The company recently completed several smaller projects linking to Marcellus production.

The company increased its dividend by 10.6% in July in conjunction with a 3-for-2 stock split. The current yield is 2.3% based on a share price that has increased more than 4% over the last month. UGI has returned more than 35% since joining the Growth Portfolio in February.

Given the growth opportunities associated with its strategic footprint overlapping the Marcellus, UGI remains attractively priced at an enterprise value/EBITDA multiple of 7, and 10 times trailing cash flow from operations. Buy UGI below the increased split-adjusted target of $45.

Western Refining (NYSE: WNR)

The southwestern refiner posted very strong third-quarter results as record discounts on Permian Basin crude relative to the West Texas Intermediate benchmark drove down its input costs and pumped up margins. Cash flow from operations more than doubled, while adjusted EBITDA quadrupled year-over-year, aided by contributions from Western’s affiliated Northern Tier Energy (NYSE: NTI) refining MLP and its logistics arm Western Refining Logistics (NYSE: WNRL).

The company hiked its fourth-quarter dividend 15% over the third quarter’s payout and 36% year-over-year. The regular dividend now provides a yield of 2.7% and Western also declared a special dividend of $2 a share payable Dec. 1 to shareholder of record as of Nov. 18.

In combination with share repurchases, Western’s extremely shareholder-friendly management now plans to return $450 million to investors over the course of 2014. The company has a market capitalization of $4.3 billion and only about $600,000 of long-term debt net of cash.

Continuing dropdowns to the affiliated MLPs, such as last month’s sale of Western’s wholesale business to WNRL for $360 million in cash and equity, are financing midstream expansion projects designed to ensure the flow of cost-advantaged crude to Western’s two refineries in the years ahead.

The share price has made no net gain over the last month in up-and-down action, but WNR has produced a total return of 27% since joining the Aggressive Portfolio not quite a year ago. Buy WNR below $46.

Williams (NYSE: WMB)

The major gas shipper and processor’s third-quarter adjusted cash profit would have been down slightly year-over-year without the effect of consolidating the results at Access Midstream Partners’ (NYSE: ACMP). Williams acquired the 50% stake in ACMP’s general partner that it did not already own earlier this year, and plans to merge the fast growing gas gatherer with its other MLP affiliate, Williams Partners (NYSE: WPZ), in a deal expected to close early next year.

Results were further hurt by the continuing delay in the restart of the big Geismar olefins plant damaged in an explosion more than a year ago. The restart is expected to take place before the end of November, but it will have come too late to negate the loss of proceeds from business interruption insurance in the latest quarter.

Geismar and two offshore projects also coming online over the next month are expected to produce an extra $1 billion of cash flow for WPZ next year. Along with the impending merger of the subsidiary MLPs and the subsequent dropdown of the remaining Williams assets into the merged partnership, that earned Williams a pass on the lackluster quarter.

The share price has ticked up 1% over the last month, and now offers a 4.2% yield based on a dividend that increased 50% year-over-year. For all of 2014, the dividend rose 36% over 2013, and Williams has forecast dividend growth of 15% in each of the next three years. That will be backed by annual distribution growth of 10% to 12% at the enlarged WPZ, with 1.10x or better distribution coverage. WMB would become a pure-play general partner, profiting from its affiliates’ investments in what the company calls a “once-in-a-generation industry supercycle.”

The hefty slate of investments now on the drawing board includes various extensions from the main Gulf-to-the-Northeast Transco gas pipeline, now adapting like so many other such shipment routes to growing demand for the transport of Marcellus and Utica gas south.

After months of basing action the unit price could pick up in the near term as Geismar and the offshore projects start up and ahead of the WPZ/ACMP merger. We’re upgrading WMB to a Buy below $59.