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| English: Pipeline near to Sines, in Portugal Français : Pipeline au Portugal, dans la région de Sines. Photo par Traroth sous GFDL. (Photo credit: Wikipedia) |
Dallas, Jun.12, best stock to buy .- The best way to play the oil and gas sectors is through pipeline companies. They are the toll roads of the energy world. Today, I'm going to “leak” some intel on one of my favorites in this sector. After all... isn't that the trend these days?
For over 75 years, pipelines have been transporting crude oil and natural gas across the continent. Today, there are nearly 500,000 miles of interstate pipelines. They carry everything from raw crude oil to diesel fuel.
It is an exciting time for pipeline operators.
Nearly all of them are expanding their networks, pumping stations and storage facilities in an effort to handle America's newfound abundance of oil and natural gas from shale deposits.
The American natural gas glut has caught the eye of energy-guzzling manufacturers. To take advantage of our growing supply of oil and gas, they're setting up new plants and retooling old ones at a frantic pace. A lot of it is happening in America's Rust Belt states. I call it the Rust Belt Revival and have written about it in detail here, here and here.
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The company I want to share some knowledge about is a small pipeline company. Like most companies in the pipeline business, it's an MLP.
Because the company's been around for less than a year, most investors have never heard of it. They have no idea it exists.
Even so, in that short time, its price has surged by over 50%.
[Note: As The Oxford Club's top income expert Marc Lichtenfeld points out, MLPs aren't generally suitable for non-taxable accounts like 401(k)s and IRAs. In a taxable account, unit holders will receive a K-1 form from the MLP instead of a 1099-DIV. It's best to consult your tax advisor regarding MLPs before tax time rolls around.]
A Crude Network
Right now, the United States has 170,000 miles of pipelines dedicated to crude oil. Another 95,000 miles carry refined petroleum products like gasoline, diesel fuel, home-heating oil and jet fuel.
Most folks think gasoline moves from refineries to gas stations via tractor-trailers. The truth is big rigs are used for just the last few miles. The bulk of the transmission is via pipeline.
Check out the map below...
Because the company's been around for less than a year, most investors have never heard of it. They have no idea it exists.
Even so, in that short time, its price has surged by over 50%.
[Note: As The Oxford Club's top income expert Marc Lichtenfeld points out, MLPs aren't generally suitable for non-taxable accounts like 401(k)s and IRAs. In a taxable account, unit holders will receive a K-1 form from the MLP instead of a 1099-DIV. It's best to consult your tax advisor regarding MLPs before tax time rolls around.]
A Crude Network
Right now, the United States has 170,000 miles of pipelines dedicated to crude oil. Another 95,000 miles carry refined petroleum products like gasoline, diesel fuel, home-heating oil and jet fuel.
Most folks think gasoline moves from refineries to gas stations via tractor-trailers. The truth is big rigs are used for just the last few miles. The bulk of the transmission is via pipeline.
Check out the map below...
There are also tens of thousands miles worth of small (2- to 6-inch diameter) crude oil gathering lines. They're located in all the major conventional and shale oil fields. For instance, Anadarko (NYSE: APC) operates 5,200 wells in Colorado's liquids-rich Niobrara formation. Oil from these wells reaches the company's Wattenberg Processing Plant via 3,000 miles of gathering lines.
In other words... crude pipelines are everywhere.
But America's natural gas pipeline system is even more impressive... and (if played right) even more lucrative.
Over 350,000 miles of pipelines crisscross the lower 48 states and the Gulf of Mexico.
Here's another map:
More than 1,500 compressor stations maintain pressure on the lines, keeping gas flowing toward more than 11,000 delivery points. And any time we have extra gas, the pipelines dump into one of more than 400 underground storage facilities that house excess production.
No One's Talking About This One
Summit Midstream Partners LP (NYSE:SMLP) is an MLP focused on growth. Based in Dallas, Summit focuses on acquiring and operating midstream infrastructure.
Its gathering systems are located in unconventional basins across the country. Until recently, the company's two primary gathering networks were located in the Piceance Basin in western Colorado, which includes the Mancos shale formation as well as the liquids-rich Mesaverde and Niobrara formations.
Summit also owns the DFW Midstream gathering system that services the Barnett Shale formation in northwest Texas. Together, the DFW Midstream and Grand River Gathering systems comprise 406 miles of gathering pipelines.
The company has a great portfolio of assets, but is constantly working to grow bigger and stronger.
On June 4, Summit announced the purchase of a strategic gas gathering system located in the Marcellus Shale play - the Mountaineer Midstream Company.
The assets include 40 miles of high-pressure gas gathering pipelines. These newly constructed lines also include two compressor stations boasting 21,000 horsepower of compression.
And on June 5, Summit announced the acquisition of another strategic gathering system. Bison Midstream's system consists of 300 miles of low- and high-pressure gas gathering pipelines. It's located in the highly productive but pipeline-sparse Bakken formation in North Dakota. Six compressor stations totaling 5,950 horsepower are also included.
Both of Summit's acquisitions are underpinned by long-term, fee-based contracts. In fact, 80% of Summit's systems are structured this way, ensuring stable long-term cash flow.
Investors seeking a growth and income-oriented (current yield is 5.16%) stock should take a deeper look at this little-known company and its bright future.
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