MarkWest Energy Partners L.P.
) hit a 52-week high of $67.61 on May 13. In fact, the Denver
Colorado-based publicly traded energy pipeline partnership has
seen its stock price climb some 30% since the beginning of the
year. This price appreciation can be attributed to its
high-quality and diverse portfolio of midstream assets, as well
as its proven track record of supporting producers in the growth
of shale plays and the steady improvement in its liquidity/cash
Why the Bullishness?
MarkWest generates stable and recurring revenues by way of
long-term fee-based contracts. It is one of the largest
processors of natural gas in the Northeast and is the largest
gatherer of natural gas in the prolific Carthage field in East
Texas. Additionally, the partnership has a number of other gas
gathering and intrastate gas transmission assets in the
Southwest, primarily in Texas and Oklahoma
MarkWest's prospects are particularly encouraging in the
Marcellus Shale play in western Pennsylvania and West Virginia.
With proven track record of supporting producers in the growth of
shale plays, the partnership is in a great position to
participate in the expansion of infrastructure that will be
required for the development of the Marcellus Shale leaseholds.
MarkWest has a track record for consistent distribution growth -
its current quarterly distribution of 83 cents per unit ($3.32
per unit annualized) is up 232% over its distribution rate of
$0.25 per unit ($1.00 per unit annualized) at the time of its
However, we think the current valuation is fair and adequately
reflects the partnership's future growth prospects. MarkWest's
core business - natural gas processing - is also faced with a
higher degree of commodity price exposure than most of its peers.
This is expected to further limit its ability to generate
positive earnings surprises.
This accounts for MarkWest's current Zacks Rank #3 (Hold),
implying that it is expected to perform in line with the broader
U.S. equity market over the next one to three months.
Stocks to Consider
With MarkWest units trading at all-time highs, any upside from
here may be limited. Meanwhile one can look at
Enbridge Energy management LLC
Kinder Morgan Management LLC
Summit Midstream Partners L.P.
) as attractive investments. These energy pipeline partnerships -
sporting a Zacks Rank #2 (Buy) - offer value and are worth
accumulating at current levels.
ENBRIDGE ENERGY (EEQ): Free Stock Analysis
KINDER MORG MGT (KMR): Free Stock Analysis
MARKWEST EGY PT (MWE): Free Stock Analysis
SUMMIT MIDSTRM (SMLP): Free Stock Analysis
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