Surprisingly, These MLPs Still Have Hidden Upside
Photo credit: Flickr/Roy Luck
Legacy Oil Field
Texas’ Permian Basin has been producing oil since the 1920’s. To date the basin has produced nearly 28.5 billion barrels of oil. However, its best days appear to be ahead of it as horizontal drilling is
unlocking an incredible amount of oil.
The Big Shift
The move to horizontal drilling is expected to deliver strong oil production growth in the years
ahead for basin focused drillers. It’s turning companies like Diamondback Energy into a growth
story…
Photo credit: Flickr/Adam Barhan
Source: Diamondback Energy Investor Presentation
Cashing inBecause of this MLPs like BreitBurn Energy Partners and
Vanguard Natural Resources are starting to realize that their legacy oil positions in the basin could be worth more money to
someone else.
Photo credit: Flickr/PhotoAtelier
Cashing in
It’s something fellow MLP LINN Energy realized when it recently
traded a portion of its position in the play. LINN Energy was able to add low decline natural gas assets in
exchange for its inventory of prospective horizontal oil wells. It’s a move that should really help to
stabilize LINN Energy’s distribution. Photo credit: LINN Energy
Follow the Leader
Both BreitBurn Energy Partners and Vanguard Natural Resources have potential to unlock this
same value in the Permian Basin. Both companies could sell or trade away acreage in order to acquire
additional low decline oil and gas properties that would enhance their distributions.
Photo credit: LINN Energy
Source: BreitBurn Energy Partners Investor Presentation
BreitBurn Energy Partners
BreitBurn Energy Partners
As the previous slide pointed out BreitBurn Energy Partners has a growing position in the Permian
Basin. The company has more than 300 potential drilling locations, which it could drill or sell to a growth focused driller. Further, as the next slide
points out, there are a lot of prospective horizontal oil targets underneath its acreage that could one
day add value to the company.Photo credit: LINN Energy
Source: BreitBurn Energy Partners Investor Presentation
BreitBurn Energy Partners
Vanguard Natural Resources
Likewise, Vanguard Natural Resources has acreage in the Permian Basin. This acreage could hold more
value than investors realize as it could be prospective for horizontal drilling as noted on the
next slide.
Photo credit: LINN Energy
Source: Vanguard Natural Resources Investor Presentation
Vanguard Natural Resources:
Vanguard Natural Resources
As the previous slide noted Vanguard Natural Resources has entered into a number of drilling
ventures (including one with Diamondback Energy) to leverage its expertise to unlock the hidden value
of its Permian Basin acreage.
Photo credit: LINN Energy
Vanguard Natural Resources
Currently, the company has no reserves tied to these development opportunities. However, as these drilling ventures find success Vanguard
Natural Resources will reap the benefits. Eventually, it could join LINN Energy and monetize
its horizontal assets.
Photo credit: LINN Energy
Investor takeawayBoth BreitBurn Energy Partners and Vanguard Natural Resources have
unrealized value potential in the Permian Basin. So far, investors surprisingly don’t see this value. It’s creating an opportunity for additional upside to investors that see this hidden value before the rest of the market does.
Photo credit: Flickr/TaxCredits.net
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