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.