MLP me, please

27 September 2007 By Cyrus Sanati

Energy companies are spinningoff billions worth of assets into Master Limited Partnerships. MLPs promise to pay a steady stream of cash to investors. But the type of assets going into new MLPs could make that promise hard to keep.

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Several energy exploration and production companies have announced intentions to convert from a CCorp to a Master Limited Partnership. Most recently, Dallasbased Exco Energy announced that it would it would drop $1.725bn worth of its longlife natural gas assets into a Master Limited Partnership.

MLPs are exempt from taxes at the corporate level because they are expected to payout most of their free cash flow to investors. This allows them to capture a higher valuation that their CCorp counterparts.

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