1 New Energy MLP in the Works: Devon Energy Corporation (DVN)

Because of its significant midstream asset footprint, Devon originally considered forming an MLP in 2007, though it eventually decided not to go ahead with it. Given these previous considerations, the high-quality assets, and the fact that capital is widely available, I have a hard time imagining this spinoff won’t come to fruition.

Boutique midstream
This MLP spinoff trend almost creates a subsector of the midstream industry. It’s very unlikely that the new Devon MLP, or MPLX, or Phillips 66’s MLP will start buying up vast amounts of assets and building out pipeline networks all across the country. And while they can certainly compete with some of the smaller MLPs, it is highly unlikely that they will ever go toe-to-toe with the bigger outfits like Kinder Morgan and Enterprise, or the Canadian giants TransCanada Corporation (USA) (NYSE:TRP) and Enbridge Inc (USA) (NYSE:ENB). Instead, these companies are making an effort to maximize the return on their existing assets, with maybe a little buying and selling along the way to keep investors happy.

Foolish takeaway
As more midstream MLPs come to be, it is important for investors to carefully evaluate and re-evaluate these opportunities. The high yields may be tempting, but not every MLP will be a buy.

The article 1 New Energy MLP in the Works originally appeared on Fool.com and is written by Aimee Duffy.

Fool contributor Aimee Duffy owns shares of Plains All American Pipeline. Click here to see her holdings and a short bio. If you have the energy, follow her on Twitter, where she goes by @TMFDuffy.The Motley Fool recommends Enterprise Products Partners and Kinder Morgan. The Motley Fool owns shares of Devon Energy and Kinder Morgan.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.