MLP Highlights
Today I attended a conference on Master Limited Partnerships (specifically energy infrastructures) and the following are some of the highlights that transpired from the event.
- The US Energy Renaissance theme was alive and well with predictions of energy independence as early as 2020-2023
- Domestic oil production is at 20 year high
- Natural gas now accounts for 50% of home heating and 30% of power generation
- Shale gas has increased from 11% of total production in 2008 to 34% in 2011 and expectations are for 60% by 2035
- New demand for natural gas will be driven by power generation conversions
- Exports of LNG are expected as early as 2015
- California Monterey Shale may contain 15 billion barrels of oil. Governor Brown recently signed the first California Fracking Law essentially opening up the process of development of the Monterey Shale
- $250 billion to $400 billion of new infrastructures are going to be needed over the next 20 years
- MLP spread to Treasuries is now at 330 bsp. Not very high but higher than pre-crisis average of 225 bps
- MLP Credit Market: current spread implies a rate of default of 10% which is more than 5x historical average
- Policy:
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- No major energy bill is anticipated
- Most policies will be led by the Administration and not by Congress; this Administration has shown to be friendly to natural gas
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