UBS Raises Oil and Natural Gas 2016 Price Targets: 3 High Yield MLPs to Buy

By Lee Jackson Updated Jan 13, 5:57AM EST · Published Jul 8, 9:45AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

UBS Raises Oil and Natural Gas 2016 Price Targets: 3 High Yield MLPs to Buy — © Thinkstock

[cnxvideo id=”510428″ placement=”ros”]After a very strong second quarter, many on Wall Street are looking at current oil and natural gas price targets and raising them, and with good reason. Continued reasonable gasoline prices during the busy summer driving season combined with very warm summer weather are pushing demand for both commodities higher, and that’s good news for the top energy master limited partnerships (MLPs).

In a recent research report, UBS lifts their price targets significantly higher for both oil and natural gas, and needless to say, higher prices should mean more revenue for the top MLPs. We screened the UBS research coverage of the sector for higher yielding companies rated Buy. We found three that look outstanding now.

American Midstream Partners

This company cut its distribution by 13% on April 21 and shares are up over 30% since. American Midstream Partners L.P. (NYSE: AMID) engages in gathering, treating, processing and transporting natural gas in the United States. Its Gathering and Processing segment provides gathering, compression, treating, processing, fractionating, transportation and sale of natural gas, natural gas liquids (NGLs) and condensate. Its Transmission segment transports and delivers natural gas from producing wells, receipt points or pipeline interconnects for shippers and other customers, which include local distribution companies, utilities and industrial, commercial and power generation customers.

The Terminals segment provides above-ground storage services, including petroleum products, distillates, chemicals and agricultural products, at its marine terminals that support various commercial customers, including commodity brokers, refiners and chemical manufacturers to store a range of products. It owns and operates 12 gathering systems, five processing facilities, three fractionation facilities, three marine terminal sites, three interstate pipelines, five intrastate pipelines and one crude oil pipeline.

The company also owns a 66.7% non-operated interest in Main Pass Oil Gathering System, a 50% undivided interest in the Burns Point Plant, a 46% non-operated interest in Mesquite and a 12.9% non-operated indirect interest in Delta House.

Shareholders still receive a whopping 13.85% distribution. The UBS price target for the stock is $15. The Thomson/First Call consensus target is $12.10. Shares closed on Thursday at $11.91.

[nativounit]

Enbridge Energy Partners

This is one stock that could be a consistent winner for investors in the years to come. Enbridge Energy Partners L.P. (NYSE: EEP) owns and operates a diversified portfolio of crude oil and, through its interests in Midcoast Operating, natural gas transportation systems in the United States. Its principal crude oil system is the largest pipeline transporter of growing oil production from western Canada and the North Dakota Bakken formation. The system’s deliveries to refining centers and connected carriers in the United States account for approximately 17% of total U.S. oil imports.

The company’s Midcoast Partners natural gas gathering, treating, processing and transmission assets, which are principally located onshore in the active U.S. Mid-Continent and Gulf Coast areas, deliver approximately 2.2 billion cubic feet of natural gas daily.

Top Wall Street analysts see the distribution backed by high-quality, fee-backed assets, and some forecast a very sustainable one-time distribution coverage through this year.

Enbridge investors receive a 10.35% distribution. UBS has a $24 price target, and consensus price objective is $23. Shares closed Thursday at $22.54.

Targa Resources

This top energy MLP has had a string of positives lately. Targa Resources Corp (NYSE: TRGP) is a leading provider of midstream services and is one of the largest independent midstream energy companies in North America. Targa owns, operates, acquires and develops a diversified portfolio of complementary midstream energy assets.

The company is primarily engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling NGLs and NGL products, including services to liquefied petroleum gas (LPG) exporters; gathering, storing and terminaling crude oil; storing, terminaling and selling refined petroleum products.

Targa posted better quarterly numbers, and it closed a $1 billion private placement, which will save $80 million a year in interest costs, and finally closed the Targa Resources Partners deal. Jefferies expects the company can keep the current distribution through 2018.

Targa shareholders are paid a 8.85% distribution. The UBS price target for the company is $47, and the consensus is a $43.38. The shares closed Thursday at $41.17.

[wallst_email_signup]

We like to remind our readers that MLP distributions can contain return of capital. These higher yielding companies make sense for more aggressive total return accounts and should provide a good alternative to other income proxy investments.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.