April 13, 2020 - 1:55pm EST by
2020 2021
Price: 9.35 EPS $1.23 0
Shares Out. (in M): 17 P/E 7.6 0
Market Cap (in $M): 155 P/FCF n/a 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 155 TEV/EBIT n/a 0

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I am using this security for my IRA accounts. The idea is best for IRAs and is not as useful for taxable accounts.

MLPs have been a terrible investments. They were run with too much leverage. They paid out too much money as distributions. They continuously issued stock to replace the capital they paid out. Many were poorly run. Some took advantage of the partnership structure to screw over their investors. In addition, they cause headaches for investors as they generate K-1s which are a nuisance. Most important for an IRA investor is that MLPs create "unrelated business income" which is prohibited by tax law. As a result, the number of people willing to invest in the sector has shrunk. If all of that were not bad enough, the oil & gas business, the focus for most MLPs, is going through a rough patch. The Alerian MLP Index (AMZ) has returned through 3/30/2010:

                Simple       Dividends reinvested

10 years - (69.9%)   /   (40.4%)

5 years  -  (78.7%)  /   (68.6%)

1 year   -  (64.2%)  /   (60.9%)

YTD      -   (51.6%)  /   (50.4%)

ATMP is an ETN (Exchange-Traded-Note) issued by Barclays Bank. The value of the shares is linked to the VWAP (Volume Weighted Average Price) of the CIBC Atlas Select MLP Index. This Index is listed on Bloomberg under the symbol BXIIATMP. The maturity date for the ATMP ETN is 3/18/2043. ATMP carries a fee of 95 BP a year. It pays dividends quarterly based on the dividends of the underlying securities in the Index. The last four dividends totaled $1.234 a share for a dividend yield of 13.4%. Importantly, the dividend rate has remained steady over the past several years as increases by better companies have matched cuts by weaker ones.There are ETNs related to MLPs which bear lower fees (80 or 85 bp) and ETNs which carry greater dividend yields (up to 19%), but I do not think that the securities underlying those ETNs are as attractive. ATMP represents interests in a fairly attractive group of companies. They are as of 3/30/2010:

Magellan Midstream Partners (MMP)          -   9.86%

Enterprise Product Partners (EPD)             -   8.67%

Phillips 66 Partners (PSXP)                       -   8.25%

MPLX LP (MPLX)                                      -   7.54%

Transcanada Corp / TC Energy Corp (TRP) -   7.33%

TC Pipelines (TCP)                                   -   6.66%

Tallgrass Energy (TGE)                            -   6.46%

Enbridge (ENB)                                       -   6.33%

Energy Transfer (ET)                               -   5.97%

Kinder Morgan (KMI)                               -   5.66%

The Williams Companies (WMB)               -   5.21%

Plains All American Pipeline (PAA)            -   4.95%

EQM Midstream (EQM)                            -   3.91%

Equitrans Midstream (ETRN)                    -   3.46%

Plains GP Holdings (PAGP)                       -   2.55%

ONEOK (OKE)                                         -   2.51%

Western Midstream Partners (WES)          -   2.5%

Enlink Midstream (ENLC )                        -   1.28%

Enable Midstream Partners (ENBL)           -    0.92%

Cash                                                     -    0.00%

Pipeline companies, whether they are gathering and processing or long haul, are attractive businesses. When an exploration and production company goes bankrupt, a pipeline company generally retains the right to gather, process and transport the liquids produced from the E&P's lease. I expect there to be a large number of E&P failures. The new owners of the producing properties, creditors or vultures, will continue to pump the liquids of the previously drilled wells. If part of a lease needs to be "held by production", the new owners will have to decide to drill it out themselves, sell the lease interest to a new investor or let it lapse.

If an E&P company is in difficulty, a pipeline company can work with it to alleviate financial stress. Gathering, processing and transportation contracts are broadly set fees over a defined period. Fees can be reduced if the contract term is extended. When everyone is in the same boat, it pays when everyone rows.

I want to own cheap pipeline stocks in my tax free accounts. ATMP gives me a pretty attractive portfolio of midstream companies at a cheap price and a premium yield.

I think that ATMP will be wrth 25% more in 12 to 18 months - plus you get the dividend for an attractive but modest rate of return.




I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


The troubles of the petroleum business sort themselves out.

The collapse of the MLP market marks its completion.

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