Natural gas pipeline master limited partnership Chesapeake Midstream Partners (CHKM) now trades under a new name and symbol - Access Midstream Partners (ACMP). The name change should be a positive – distancing the MLP from the troubled Chesapeake Energy (CHK).
Earlier this month, private equity firm Global Infrastructure Partners completed the purchase of the Chesapeake Midstream general and limited partnership interest from Chesapeake Energy. The 2010 IPO of Midstream Partners was a joint venture between the two companies – Chesapeake Energy and Global Infrastructure Partners.
Access Midstream Partners provides natural gas gathering pipelines and facilities in the major gas shale plays of the Barnett Shale, Haynesville Shale, Marcellus Share and Mid-Continent. The company claims to be the largest natural gas midstream MLP company by gas throughput. The business model for Access Midstream Partners is strictly fee based with contract minimum volumes and annual escalations.
Growth potential comes from hooking up new well pads from existing customers and picking up drop down assets from Global Infrastructure Partners and Chesapeake Energy. The midstream company has a letter of agreement with Chesapeake to receive additional drop down assets in the future. To help Chesapeake Energy with its financial problems, Global Infrastructure paid $4 billion for natural gas pipeline assets. Of that amount $2 billion was for the Midstream Partners holdings, which means there is an additional $2 billion worth of assets which could end up with Access Midstream Partners from Global Infrastructure Partners.
Based on the most recent dividend of 40.5 cents per unit, Access Midstream Partners has a current yield of 5.7%. The recent trend has been to increase the distribution by 1.5 cents each quarter. With the general partnership interests in new hands and not much in the way of new assets since late 2011, it will be interesting to see what happens with the next dividend announcement. Last year, the third quarter distribution was announced during the last week in July. If the dividend goes up, the share price should increase slightly. If the dividend rate is not increased, the share value could drop to put the yield in the 6.5% to 7% range, indicating a price drop into the $23 to $24 range. Access Midstream should be an excellent long term income investment and any share price drop would be a buying opportunity.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.