Personal Finance
SE

Why Shares of Midcoast Energy Partners and DCP Midstream Partners Gained Ground in December

MEP Chart
MEP Chart

MEP data by YCharts .

As recently as the second quarter of 2016, Enbridge Energy Partners (NYSE: EEP) was looking into strategic alternatives for Midcoast . Typically, the term strategic alternative is a veiled way of saying sell the business. Likewise, it wasn't that long ago that DCP's sponsor companies, Spectra Energy and Phillips 66 , gave the company two long haul natural gas liquids pipelines and $1.5 billion in cash to prop up poor results.

Since that time, though, a lot has changed. On top of the rise in gas rigs and consumption, the two companies have taken several steps to improve profitability. Midcoast announced during its most recent earnings release that it had cut costs significantly and would be able to fully support its distribution with cash from operations. DCP Midstream Partners, on the other hand, just announced on Jan. 4th that it would acquire all outstanding assets from the holding company co-owned by Spectra and Phillips 66 and become a stand-alone business.

Both Enbridge and Spectra Energy have not made any mention how all of their subsidiary partnerships will be handled when the two combine, or whether it may need to sell some assets. With both Midcoast Energy Partners and DCP Midstream Partners looking like more stable companies lately, it will at a minimum make it easier to find a buyer if the combined company decides to unload these assets.

Now what

Things are looking better at Midcoast and DCP Midstream Partners lately, and increasing natural gas production will help that along even more. That being said, there is still a lot up in the air between DCP's recent restructuring announcement and the Spectra Energy-Enbridge marriage that has not yet been finalized. These two things mean much could change quickly for both companies.

Even though both have shown signs of improving, neither really has the balance sheet strength or operations results to have complete confidence to stand on their own. So until we get some more definitive decisions on what their parent companies plan to do, it's probably best to sit on the sidelines.

10 stocks we like better than DCP Midstream Partners

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and DCP Midstream Partners wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 4, 2017

Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com or on Twitter @TylerCroweFool .The Motley Fool owns shares of and recommends Spectra Energy. The Motley Fool recommends DCP Midstream Partners and Enbridge Energy Partners. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SE ENB

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More