This article was first published by Seeking Alpha on March 9, 2015.
By Sarfaraz A. Khan
Amid the
ongoing downturn in the energy space, the dividends of several energy companies
have come under pressure. But the cash distributions offered by some midstream
master limited partnerships - such as Western Gas Partners (NYSE:WES) -- offer
protection against the commodity price swings.
Western Gas
Partners is a relatively young midstream MLP which was formed by Anadarko
Petroleum (NYSE:APC) and debuted at the stock market in 2008. Around 8% of the
MLP's limited partner interest is owned by Anadarko while 35% of its limited
partner and nearly 2% of the general partner interest is held by Western Gas
Equity Partners (NYSE:WGP). Western Gas Partners owns and operates natural gas
gathering systems, pipelines, treating and processing plants as well as NGL
pipelines and a single oil pipeline. These assets are located in Colorado,
Utah, Wyoming, Kansas, Oklahoma, Pennsylvania and Texas.
Western Gas
has a fee-based business model under which it receives a payment at
predetermined rates for every unit of gas gathered, treated or processed at its
facilities. This rate of payment is usually underpinned by long-term
agreements. These factors minimize the company's exposure to commodity price
swings.