• Entertainment
  • Finance
  • Marketing
  • Real Estate
  • Technology
  • Social
National Journal Community Of e-Experts
Finance 0

Dwindling Pipeline Capacity Causes FOMO

By Kurt Osterberg · On April 22, 2018

FOMO (Fear of Missing Out) hasn’t been much of a problem for energy infrastructure investors over the past year or so. Feelings of WAIL (Why Am I Long?) and (ahem) WTH have been far more common. So the recent rally in the sector has led many investors to enquire why. Earnings only began to be released on Wednesday when Kinder Morgan (KMI) announced a 60% dividend increase and $500MM of stock repurchases since December. Although the dividend hike was expected, the stock nonetheless gained ground. KMI’s 2014 simplification, when they moved from four public entities to one, heralded the conflict between the old and new business model.

Shale Revolution-induced growth opportunities pursued by management collided with the desire of income-seeking investors for steadily growing cashflows (see Will MLP Distribution Cuts Pay Off?). An adverse tax outcome and two distribution cuts followed for original investors in Kinder Morgan Partners. MLP simplification became synonymous with abuse of your core investors, at least until Tallgrass (TEGP and TEP) recently managed to execute one that was well received.

Nonetheless, the persistent high yields on MLPs betray the skepticism of their traditional investor base of older, wealthy Americans. Last year Oneok (OKE) combined with its MLP Oneok Partners, inflicting a KMP-type tax bill on long-time MLP holders. One friend of mine held its predecessor Northern Border Partners from the 1990s, and received an unexpected tax bill on deferred income recapture that was timed to suit OKE, not him. Such investors are not about to commit new money to MLPs. This is the problem facing MLPs but not corporations. MLPs are cheap, but they’ve alienated their core investor base, which is already narrow. This is why investors need to look for broad energy infrastructure exposure including corporations, and not be limited to MLPs (see The American Energy Independence Index). KMI’s $500MM stock buyback would not have happened when they were structured as an MLP.

Print Friendly, PDF & Email

Share Tweet

Kurt Osterberg

You Might Also Like

  • Finance

    How to Create a Positive Work Culture For Your Remote Business

  • Finance

    The Myth of the Agile Project Manager

  • Finance

    The Scrum Master Job (1): 4 Steps to Identify Suitable Employers or Clients

No Comments

Leave a reply Cancel reply

Top Finance

  • Chart: Amazon’s Dominance In Ecommerce Chart: Amazon’s Dominance In Ecommerce
  • Shark Tank Recap: Shed Defender, Tata Towels and Sanaia Applesauce Secure Deals Shark Tank Recap: Shed Defender, Tata Towels and Sanaia Applesauce Secure Deals
  • Hedge Funds In The US Hedge Funds In The US
  • One Ring To Rule Them All One Ring To Rule Them All
  • Dollar General (DG) Q2 Earnings And Revenues Surpass Estimates Dollar General (DG) Q2 Earnings And Revenues Surpass Estimates

New Posts

  • How to Create a Positive Work Culture For Your Remote Business

    How to Create a Positive Work Culture For Your Remote Business

    January 28, 2021
  • The Myth of the Agile Project Manager

    The Myth of the Agile Project Manager

    January 28, 2021
  • The Scrum Master Job (1): 4 Steps to Identify Suitable Employers or Clients

    The Scrum Master Job (1): 4 Steps to Identify Suitable Employers or Clients

    January 28, 2021
  • How Freelancers Can Catch FIRE (Financial Independence Retire Early)

    How Freelancers Can Catch FIRE (Financial Independence Retire Early)

    January 28, 2021
  • How to Use Geotargeting, Plus Best Practice Tips

    How to Use Geotargeting, Plus Best Practice Tips

    January 28, 2021
  • About
  • Contact Us
  • Privacy & Policy
  • Sitemap
  • Terms of use

Copyright © 2018 NJCEE. All Rights Reserved.