A Wall Street Transcript Interview with Elvira Scotto, a Director and MLP Equity Research Analyst for RBC Capital Markets: Midstream MLPs with Long-Term Pipeline Asset Drop-Down Plans are Top Picks

Wall Street Transcript

67 WALL STREET, New York - March 28, 2014 - The Wall Street Transcript has just published its Oil & Gas: Master Limited Partnerships Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Increasing Demand for Midstream Assets - U.S. Energy Infrastructure Build Out - Emerging Shale Plays - Outlook for Natural Gas Liquids - Oil and Gas Investing - Shale Production Growth

Companies include: Boardwalk Pipeline Partners, L (BWP), Plains All American Pipeline L (PAA), Western Gas Partners Lp (WES), DCP Midstream Partners LP (DPM), Anadarko Petroleum Corp. (APC) and many others.

In the following excerpt from the Oil & Gas: Master Limited Partnerships Report, an expert analyst discusses the specific prospects for a variety of MLPs in the sector for investors:

TWST: Let's start with a snapshot of your coverage universe. I believe your focus is more on the midstream segment of MLPs.

Ms. Scotto: That's correct. At RBC we have three senior analysts who cover the MLPs. We have one upstream analyst, and there are two of us who cover the midstream names. Between the two of us, we cover about 50 or so names, and I cover around 24 midstream MLPs. For purposes today, I will be talking about the names under my coverage.

TWST: What would you say are the most important industry trends at play for the midstream MLP businesses today? Are the shale plays still the big driver; does the need for infrastructure continue to grow?

Ms. Scotto: The continued development of the shale and unconventional resource plays remains a key industry trend for the midstream MLPs in our view, especially as drilling and production costs move lower. Producers can economically extract crude oil, natural gas liquids and natural gas from emerging or in some cases re-emerging areas. This trend has been significant for the midstream MLPs, as the production growth in these areas drives the need for additional infrastructure and logistics solutions, which could require a replumbing of the pipeline system.

For example, there has been a significant ramp in natural gas production in the Marcellus Shale in Pennsylvania/Ohio/West Virginia. Traditionally natural gas flowed from the Gulf Coast or even the Rockies to supply the Northeast markets. However, with growing production in the Marcellus Shale, the Northeast may not need to source as much natural gas from the Gulf Coast or the Rockies, and some of the midstream MLPs have announced pipeline reversals or even new projects to move this Marcellus gas to additional markets. Natural gas liquids production is also growing in the Marcellus Shale. These NGLs will need to find a home, and there are several proposed takeaway solutions there as well.

On the crude oil side, I'll use the Williston Basin/Bakken Shale as an example. Crude oil production in the Williston Basin has grown from a little over 200,000 barrels per day in 2009 to close to 700,000 barrels per day in 2013. Currently there is not enough pipeline takeaway capacity out of the area, and there has been increased use of rail to move the crude oil to the coasts, which is driving the need for additional rail loading facilities that the midstream operators are constructing. Longer term, we expect more pipeline capacity to come online to service this area.

In general, crude oil production in the U.S. has grown significantly in the past several years, from 5.5 million barrels per day in 2010 to close to 7.5 million barrels per day in 2013, and even closer to 8 million today...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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