Surprisingly, These MLPs Still Have Hidden Upside

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Surprisingly, These MLPs Still Have Hidden Upside Photo credit: Flickr/Roy Luck

description

Both BreitBurn Energy Partners and Vanguard Energy Partners have surprisingly hidden upside to the Permian Basin.

Transcript of Surprisingly, These MLPs Still Have Hidden Upside

Page 1: Surprisingly, These MLPs Still Have Hidden Upside

Surprisingly, These MLPs Still Have Hidden Upside

Photo credit: Flickr/Roy Luck

Page 2: Surprisingly, These MLPs Still Have Hidden Upside

Legacy Oil Field

Texas’ Permian Basin has been producing oil since the 1920’s. To date the basin has produced nearly 28.5 billion barrels of oil. However, its best days appear to be ahead of it as horizontal drilling is

unlocking an incredible amount of oil.

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The Big Shift

The move to horizontal drilling is expected to deliver strong oil production growth in the years

ahead for basin focused drillers. It’s turning companies like Diamondback Energy into a growth

story…

Photo credit: Flickr/Adam Barhan

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Source: Diamondback Energy Investor Presentation

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Cashing inBecause of this MLPs like BreitBurn Energy Partners and

Vanguard Natural Resources are starting to realize that their legacy oil positions in the basin could be worth more money to

someone else.

Photo credit: Flickr/PhotoAtelier

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Cashing in

It’s something fellow MLP LINN Energy realized when it recently

traded a portion of its position in the play. LINN Energy was able to add low decline natural gas assets in

exchange for its inventory of prospective horizontal oil wells. It’s a move that should really help to

stabilize LINN Energy’s distribution. Photo credit: LINN Energy

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Follow the Leader

Both BreitBurn Energy Partners and Vanguard Natural Resources have potential to unlock this

same value in the Permian Basin. Both companies could sell or trade away acreage in order to acquire

additional low decline oil and gas properties that would enhance their distributions.

Photo credit: LINN Energy

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Source: BreitBurn Energy Partners Investor Presentation

BreitBurn Energy Partners

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BreitBurn Energy Partners

As the previous slide pointed out BreitBurn Energy Partners has a growing position in the Permian

Basin. The company has more than 300 potential drilling locations, which it could drill or sell to a growth focused driller. Further, as the next slide

points out, there are a lot of prospective horizontal oil targets underneath its acreage that could one

day add value to the company.Photo credit: LINN Energy

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Source: BreitBurn Energy Partners Investor Presentation

BreitBurn Energy Partners

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Vanguard Natural Resources

Likewise, Vanguard Natural Resources has acreage in the Permian Basin. This acreage could hold more

value than investors realize as it could be prospective for horizontal drilling as noted on the

next slide.

Photo credit: LINN Energy

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Source: Vanguard Natural Resources Investor Presentation

Vanguard Natural Resources:

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Vanguard Natural Resources

As the previous slide noted Vanguard Natural Resources has entered into a number of drilling

ventures (including one with Diamondback Energy) to leverage its expertise to unlock the hidden value

of its Permian Basin acreage.

Photo credit: LINN Energy

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Vanguard Natural Resources

Currently, the company has no reserves tied to these development opportunities. However, as these drilling ventures find success Vanguard

Natural Resources will reap the benefits. Eventually, it could join LINN Energy and monetize

its horizontal assets.

Photo credit: LINN Energy

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Investor takeawayBoth BreitBurn Energy Partners and Vanguard Natural Resources have

unrealized value potential in the Permian Basin. So far, investors surprisingly don’t see this value. It’s creating an opportunity for additional upside to investors that see this hidden value before the rest of the market does.

Photo credit: Flickr/TaxCredits.net