DCP Midstream Partners LPDPM

Morningstar Rating

Stock Research and Analysis

by Avi Feinberg

DCP Midstream Partners LP (DPM) is a master limited partnership with a small but diverse asset base, attractive growth prospects, and powerful sponsorship from its corporate parent. Acquisitions and asset drop-downs have dramatically increased the partnership's Read more

Bulls Say

DPM's general partner, DCP Midstream LLC, is among the largest U.S. midstream operators and brings remarkable experience, management depth, and asset drop-down opportunities to the partnership.

Some of the company's asset base is interlinked, allowing the firm to collect economic rents across multiple portions of the midstream value chain.

If market conditions improve, DPM could at some point acquire the remaining 50% of East Texas, which would be a significant drop-down for the partnership.

DPM is small enough that even modest projects and deals will move the needle, and there's much more opportunity for small accretive projects in the industry than for giant blockbusters.

Increasing fee-based cash flows and hedging protect against downside commodity exposure while preserving some upside. Read more

Bears Say

Although DPM can spend modestly and avoid going to market temporarily by using the $220 million left under its revolver, long-term growth and distribution payments will thrive only as the markets permit.

DCP is little more than an MLP appendage to its general partner, and unitholders have no assurance that their long-term interests will be served.

Customer concentration is another risk since a large portion of total revenue comes from transactions with DCP's general partner and the companies that own it.

Gathering and processing assets serve producers in one geographic region, where production eventually declines; active pursuit of growth is required to generate free cash flows in the long run.

Like owners of any partnership, investors in DCP Partners are responsible for their share of the partnership's tax bill. This can decrease the net returns investors enjoy from holding the partnership units and increase tax-filing complexity. Read more

Strategy

After a flurry of deals, we hope DCP will take a breather to consolidate and integrate its new assets, though we would not be surprised by more drop-down deals in coming years. We also hope to see more Read more

Management

DCP Midstream Partners is managed and controlled by its general partner, DCP Midstream LLC, a joint venture between Spectra Energy and ConocoPhillips. Mark Borer, a longtime executive with DCP Midstream, was appointed CEO in November 2006. There are Read more

Profile

DCP Midstream Partners LP is a midstream master limited partnership that gathers, processes, transports, and markets natural gas and natural gas liquids in Louisiana, Texas, Read more

First Name

Last Name

Email Address

Zip Code

Create Password

Verify Password

(6-15 characters; case sensitive)

What is your occupation or job title?

Select...

Your registration indicates agreement to the terms of use.

The Trouble with Valuing Energy Companies
Watch more