Some producers are concerned that the new U.S. upstream master limited partnerships (MLPs) will ruin the domestic business, that more and more assets will go into harvest mode and not see reinvestment. If these assets go back on the market years from now for exploration companies to take another whack at them, there may be fewer explorationists in the industry and even fewer able to figure out how to crack the code on surfacing the balance of the remaining reserves. Yet, there are many more producers-and investors-excited about the emergence of the new U.S. E&P MLPs. They're excited about prices they can get for properties they will sell to them, and they're busy considering their own portfolios for assets they can spin out as MLPs, selling shares into the public market. Some are changing their existing business plan to explore less and develop more-to focus on turning their proved undeveloped (PUD) reserves into proved developed producing (PDP), and are paying less attention to probable reserves right now. "I want to create an asset package an MLP will buy," says the chief executive of a Texas-focused producer. One problem: this operator's focus is the exploration-oriented East Texas Bossier and Austin Chalk. Neither of these types of assets are the kind the MLPs are seeking. These assets involve exploration; MLPs seek production. They are "P" companies, rather than E&P companies. For more on this, see the July issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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