Enterprise Products Partners L.P. (EPD), BreitBurn Energy Partners L.P. (BBEP) & Plains All American Pipeline, L.P. (PAA): Three MLPs for a Safe Retirement Portfolio

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Enterprise Products Partners L.P. (NYSE:EPD)The energy sector has not been immune to the economy’s downturn, but it still has areas of growth that show considerable promise. In this sector, there are still plenty of opportunities for investment and income. In this piece, I pick a few promising MLPs from the energy sector. These MLPs offer regularly increasing distributions. These are Enterprise Products Partners L.P. (NYSE:EPD), BreitBurn Energy Partners L.P. (NASDAQ:BBEP) and Plains All American Pipeline, L.P. (NYSE:PAA)‘s. Let’s review each MLP’s ability to sustain its returns.

Moving toward fee-based business

Enterprise Products Partners L.P. (NYSE:EPD) is a master limited partnership. Being organized as an MLP, its shareholders enjoy many tax advantages. Enterprise has been paying regularly increasing quarterly distributions. At the moment, the partnership offers a quarterly distribution of $0.67/share.

Is the distribution safe?

The partnership has been consistently benefiting from investments in fee-based business. Its investments in fee-based business are generating high gross operating margins. This helps to offset its weakness in natural gas processing and related NGL marketing activities. Therefore, during the first quarter, Enterprise has begun operations on major assets totaling almost $400 million of capital investment to boost its fee-based revenue. Additionally, its onshore crude oil segment is also generating record operating margins.

For the remaining year, it is looking to complete growth capital projects of $2.2 billion, including two NGL fractionators at Mont Belvieu during the fourth quarter of 2013, the Texas Express NGL pipeline during the third quarter of 2013, and the Front Range NGL pipeline during the fourth quarter of 2013. I believe it is positioned well to increase its distributable cash flow with additional sources of fee-based volume.

Expanding production

BreitBurn Energy Partners L.P. (NASDAQ:BBEP) is an oil and gas partnership engaged in the acquisition, exploitation, and development of oil and gas properties. At present, BreitBurn offers a quarterly distribution of $0.47/share, yielding at 10.24%. BreitBurn has an established history of consistently increasing dividends. The table below demonstrates this trend:

Year Rate
2009 $0.52
2010 $1.1475
2011 $1.6825
2012 $1.83
2013 $1.90

Is the distribution safe?

The company’s development program mainly concentrates on high-margin oil opportunities in both its legacy and newly acquired assets. The majority of its capital spending is on high-margin oil projects, including those in Texas and California. The company is on track with its $261 million capital program. The partnership runs five rigs at the moment, which can increase to 11 rigs by the end of 2013. The partnership is expecting to end the year with liquids comprising about 55% of total production.

With the massive increase in production levels, its top-line growth is solid. It is consistently increasing its production levels with a smart investment strategy. At the end of the first quarter, the partnership was able to reach a record production level of 2.35 million barrels of oil equivalent (MMBOE). Its liquid production is nearly 51% of total production, which increased by 40% at the end of the recent quarter. With a convincing investment strategy and increasing production levels, the company is well positioned to sustain returns for investors.

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