MLPs which are the fastest growing and should see the greatest growth in their distribution yields.
The High Growth MLPs are those which have the highest distribution growth prospects. These MLPs may be new issues MLPs benefitting from midstream assets being dropped down by their sponsor or General Partner. High Growth MLPs also have high distributable cash flow growth and they may be located in the shales with the best economics.
We typically have 8 MLP holdings in a profile. To augment our security selection process, we developed quantitative models to identify the most attractive MLPs from those which would qualify as high growth.
Below is a back-tested return profile based on our proprietary quantitative rules and inputs since March 2016 when oil and the sector and bottomed. We use quantitative methods to identify factors that explain performance but are careful not to use those characteristics which historically fit, but are not forward looking. The High Growth model below reflects a 29.49% annualized return which outpaces the XLE energy index which annualized 14.52%. This model has an alpha of 19.38%, a sharp ratio of 1.57 and lower maximum draw-down than the XLE benchmark.
Representative High Growth Holdings
Valero Energy Partners LP (VLP) a fee-based, growth-oriented, traditional master limited partnership that owns, operates, develops and acquires crude oil and refined petroleum products pipelines, terminals and other transportation and logistics assets. VLP was formed by Valero Energy Corporation (VLO) an international oil refiner to serve as its primary vehicle to expand the transportation and logistics assets supporting its business. VLP generates revenue by charging tariffs and fees for transporting crude oil and refined petroleum products through its pipelines and terminals. Because VLP does not take ownership of or receive any payments based on the value of the crude oil or refined petroleum products that it handles and does not engage in the trading of any commodities, VLP has no direct exposure to commodity price fluctuations. The company has a market capitalization of $2.9 billion, a 4.32% yield, was founded in 2013 and is headquartered in San Antonio, Texas. Valero Energy Partners LP is a subsidiary of Valero Energy Corporation.
Antero Midstream Partners LP (AM) is a growth-oriented limited partnership formed by Antero Resources Corporation (AR) to own, operate and develop midstream energy assets to service Antero’s rapidly increasing production. AM’s assets consist of gathering pipelines and compressor stations through which it provides midstream services to Antero Resources Corporation under a long-term, fixed-fee contract. AM’s assets are located in the rapidly developing liquids-rich southwestern core of the Marcellus Shale in northwest West Virginia and liquids-rich core of the Utica Shale in southern Ohio, which are two of the premier North American shale plays. AM’s strategically located assets and its relationship with AR positions it to become a leading midstream energy company serving the Marcellus and Utica Shales. The company was founded in 2013 and is headquartered in Denver, Colorado. Antero Midstream Partners LP has a $5.33 billion market capitalization, 5.21% yield and is a subsidiary of Antero Resources Corporation.
Noble Midstream Partners LP (NBLX) is a growth-oriented Delaware master limited partnership which owns, operates, develops and acquires midstream infrastructure assets in the United States. The company provides crude oil, natural gas, and water-related midstream services. NBLX currently provides crude oil, natural gas and water-related midstream services for Noble Energy, Inc. (NBL) through long-term, fixed-fee contracts. NBLX’s operating assets are currently focused in the Denver-Julesburg “DJ” Basin, in Colorado, one of the premier liquid hydrocarbon basins in the United States. NBL intends for NBLX to become its primary vehicle for domestic midstream operations. NBLX believes that its diverse midstream infrastructure assets and relationship with NBL position it as a leading midstream service provider. NBLX have entered into multiple fee-based commercial agreements with NBL, each with an initial term of 15 years, utilizing its infrastructure assets to provide an array of services critical to NBL’s upstream operations in the DJ Basin. NBLX’s agreements include substantial acreage dedications and operates in the DJ Basin in Colorado and the Delaware Basin in Texas. The company was founded in 2014, has 1.77 billion market capitalization, yields 3.87% and is based in Houston, Texas. Noble Midstream Partners LP is a subsidiary of Noble Energy, Inc.