"The majority of questions coming into our business concern gas markets, resource plays and MLPs," Dan Pickering, principal and founder of Pickering Energy Partners, Houston, told Houston Producers' Forum members recently. Pickering calls the MLPs (master limited partnerships) "magic little pills." They are in favor on Wall Street, but not all assets are appropriate, and a boom or bust situation is possible, he added. "The predictability of long-lived reserves is popular on Wall Street. Offshore is out of favor." The MLPs are a $180-billion enterprise. "Most of that is in the pipelines. E&Ps are $7- or $8 billion of that." Investors like the fact that 90% of gross profit must be associated with natural resources, and that MLPs have been a high-yield, high-growth financial structure in recent years. The right kinds of assets are needed to form an upstream MLP, such as long-lived reserves, a high tax basis, low-maintenance capex, and an opportunity to drop down assets and acquire more assets. "It's changing the way investors value stocks," Pickering said. For more on this, see the June issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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