In recent years, midstream master limited partnerships (MLPs) relied on acquisitions to fuel growth, but the trend has clearly shifted. Organic growth is now the name of the game for virtually all of them. Analysts expect this to continue in 2007 and beyond. Some say this is good, but the focus on organic growth concerns others. Merrill Lynch analyst Gabe Moreen favors organic growth for the midstream sector because the acquisition market has become increasingly competitive, driving up multiples for midstream energy assets. "An organic-growth strategy provides attractive returns and project economics and allows an MLP to expand its asset base while avoiding the competitive acquisition market," Moreen says. The acquisition market has become heated as a result of the proliferation of MLPs, with the increased private-equity interest in midstream energy assets also paying a role, Moreen points out. "Almost all MLPs have been active in the third-party acquisition market," he says. For more on this, see the February issue of Oil and Gas Investor. For a subscription, call 713-260-6441.
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