Gathering systems consist of small-diameter pipes that transport natural gas from the wells to facilities that process the output before it enters the interstate pipeline network.

Gas gatherers’ prosperity is linked directly to the health and nature of the production areas they service. As a result, this business line is heavily impacted by recovery and decline rates, as well as the commodity prices.

The steep drop in natural gas prices has, for example, weighed on gathering activity in areas such as the Haynesville Shale that primarily produce natural gas. On the other hand, depressed natural gas prices have yet to constrain gathering operations in the Eagle Ford Shale or the portions of the Barnett Shale that also contain significant quantities of natural gas liquids (NGL).

Location is the key when evaluating MLPs that own gathering system. Names focused on liquids-rich plays are enjoying record profits, while those servicing dry-gas regions could suffer from a decline in drilling activity because of inferior wellhead economics.

But the vast majority of MLPs that own gathering pipelines boast a diversified business mix, both in terms of geography and the type of assets in their portfolios. Management teams at these companies long ago learned the dangers of a concentrated asset base.

Most owners of gathering systems also own a range of other assets, including much lower-risk assets such as long-haul pipelines that generate fee-based revenue streams.

Aggressive Portfolio holding Regency Energy Partners LP (NYSE: RGP), for example, has partnered with Energy Transfer Partners LP (NYSE: ETP) NGL pipelines and fractionation facilities that separate these heavier hydrocarbons into discrete components. Regency Energy Partners expects to increase its gathering and processing throughput by 25 percent to 30 percent in 2012.

The stock has underperformed of late, likely because of concerns about the impact of falling gas prices on its gathering operations in the Haynesville Shale. But scared investors shouldn’t overlook the strength of the MLP’s overall portfolio and the potential for drop-down transactions from Energy Transfer Equity (NYSE: ETE) to spur distribution growth. Buy Regency Partners LP up to 29.

Growth Portfolio holding DCP Midstream Partners LP (NYSE: DPM) in late April boosted its distribution by 5.6 percent from year-ago levels. The LP is moving full bore into the NGL business. Key projects include a venture with Enterprise Products Partners LP (NYSE: EPD) to transport NGLs from Colorado to Texas. The 435-mile pipe should come online in the fourth quarter of 2013. Buy DCP Midstream Partners LP when the stock dips to less than 40.

Units of Eagle Rock Energy Partners LP (NSDQ: EROC) yield almost 9 percent, as the MLP’s fourth consecutive increase to its quarterly distribution failed to improve investor sentiment toward the stock. The firm’s distributable cash flow surged by 84 percent in 2011, despite the negative impact of volatile natural gas and ethane prices.

Eagle Rock Energy Partners’ gathering system works hand-in-glove with its processing assets. Key areas of development include the East Panhandle, the Granite Wash play and Austin Chalk play. Buy Eagle Rock Energy Partners LP up to 12.

When venturing outside our model Portfolios, investors seeking exposure to the gathering business should tread carefully. We like Chesapeake Midstream Partners LP (NYSE: CHKM) owns gathering and processing assets that service 3.7 million acres and comprise than 3,800 miles of pipelines.

The troubles of Chesapeake Energy Corp’s (NYSE: CHK) founder and CEO Aubrey McClendon have clouded some investors’ views this MLP. But the MLP’s five consecutive quarterly distribution increases–the latest announced on April 27, 2012–paints a picture of a healthy and growing company.

Chesapeake Midstream Partners’ asset base ranges from dry-gas plays such as the Haynesville Shale to the Marcellus Shale’s liquids-rich fairway. With a diversified portfolio of gathering and processing assets, Chesapeake Midstream Partners LP rates a buy up to 31.