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Stock Strategist

This MLP Is Positioned to Shine

A recent transaction shifts this MLP from a marginal investment vehicle into a major player in natural gas transportation.


Spectra Energy's move to drop down all of its gas transmission assets and its interests in oil and natural gas liquid pipelines fundamentally transformed  Spectra Energy Partners (SEP) into a first-tier master limited partnership. The transaction, which closed in November 2013, shifts SEP from a marginal investment vehicle for Spectra to house interests in slow-growth pipelines into a major player in natural gas transportation with strong exposure to the Marcellus Shale, the nation's most prolific gas play.

In our view, this transaction creates one of the more attractive, low-risk business models in the MLP space while bolstering Spectra Energy's growth outlook. SEP provides Spectra with a more tax-efficient way to fund its growth, an important consideration because Spectra has approximately $25 billion in identified growth projects underway, it has just completed the $1.2 billion New Jersey-New York Expansion, and it recently received approval to build the $3.2 billion Sabal Trail pipeline into Florida.

Jason Stevens does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.