Cramer: Smaller MLPs with Big Potential
Cramer's a fan of pipeline master limited partnerships, or MLPs. Although he often talks about the big boys, here he takes a look at some niche players.
"Smaller pipeline master limited partnerships are levered to specific commodities, like oil, natural gas, and natural gas liquids," Cramer said. "So, in the interest of giving you more options, following are three more names for your radar."
MarkWest Energy Partners
"If you want a pipeline operator that's specifically focused on natural gas, then in my view the most valuable player is MarkWest Energy Partners," Cramer said.
MarkWest provides natural gas gathering, transportation, processing and fractionation services.
"The company's gathering systems are basically small networks of pipelines that collect natural gas from the wells where it's produced so it can be taken to a larger pipeline. Nat gas processing and fractionation is where you remove contaminants and then separate the pipeline quality natural gas from the nat gas liquids, like ethane and propane. So, if you're a natural gas producer, you need somebody like MarkWest to actually bring your gas to market," Cramer explained.
Although this stock is an MLP, Cramer added that there's a very important distinction between MarkWest and a lot of the other pipeline MLP's that he regularly talks about.
"Unlike Kinder Morgan and Enterprise Products Partners, which I talk about often, MarkWest is not simply a toll road," Cramer said. "The company gets 40% of its cash flows from fee-based business and the rest, comes from a percentage of the gas it processes."
That means this stock has some exposure to fluctuating commodity prices. And the spot price of nat gas has been a source of pain for more than a few investors.
However, the exposure may decline in the years ahead.
"MarkWest is moving aggressively to become more fee-based. By 2015, nearly two-thirds of MarkWest's business is expected to be of the fee-based toll road variety," Cramer said.
Therefore, if you believe that nat gas is the energy of the future, this stock belongs on your radar.
Plains All American
If you're interested in pipelines that carry crude, Cramer thinks you should take a look, here.
"Plains All American has tremendous assets that connect North Dakota's Bakken shale, the largest oil discovery in a generation, with the refineries in the Midwest," Cramer explained.
"This is an area where pipe is in incredibly high demand, which is why Plains also operates a fleet of barges to transport oil in areas where they pipelines don't go. The company also has a joint venture in the Eagle Ford shale, the other huge oil find in this country, and the more oil these areas produce, the better Plains All American should do."
Therefore, if you believe that North America could become energy independent by 2020, then this stock definitely belongs on your radar. "If you believe in the theme as I do, this company looks to be in the sweet spot," Cramer said.
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This stock is a play on natural gas liquids; Williams Partners has a major facility on the Gulf coast where they produce NGLs that are used by chemical companies.
The potential of natural gas liquids could be substantial and Cramer believes that Williams is well positioned should the potential pan out.
"Williams has a vast, integrated pipeline network, and they plan to place $12 billion worth of organic growth projects into service from this year through 2015," Cramer explained.
However, Cramer also said this stock is not without risk. The potential may not pan out.
"You have to be aware that the natural gas liquids market can be a difficult one and it's not so hot right now, which is why this stock can be more volatile than the other pipeline MLPs," Cramer said.
If nothing more, it's worth keeping an eye on this one.
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