Master Limited Partnerships Cut, Suspend Dividends to Improve Liquidity

Sonn Law Group is investigating claims related to master limited partnerships (“MLPs”) such as Kinder Morgan, Inc. (KMI), Southcross Energy Partners LP (SXE), Atlas Resource Partners LP (ARP), and Breitburn Energy Partners LP (BBEP). A master limited partnership (“MLP”) is a tax-exempt, publicly traded company combining the tax benefits of a limited partnership with the liquidity of publicly traded securities. As a result of its structure, an MLP does not pay corporate income tax, but rather passes its tax liability to its owners in the form of a cash dividend (distribution), which permits an MLP to offer very healthy yields for investors. Falling energy prices, however, have made such high rates of distribution unsustainable and prompted several MLPs to suspend or decrease dividends in an effort to shore up cash while facing uncertainty over the future of oil prices. For example:

Kinder Morgan Inc. is the largest energy infrastructure company in North America, and owns an interest in or operate approximately 84,000 miles of pipelines and approximately 165 terminal, according to its website. On December 8, Kinder Morgan drastically cut its dividend by 75% to 50 cents per share annually, according to Zack’s. KMI has a 52 week low of $11.20 and a 52 week high of $44.71. Today’s close was $12.01.

Breitburn Energy Partners LP is a publicly traded, independent oil and gas master limited partnership focused on the acquisition, development, and production of oil and gas properties throughout the United States, according to its website. Breitburn Energy Partners recently announced that it would suspend its common unit distribution. BBEP has a 52 week low of $0.46 and a 52 week high of $9.40. Today’s close was $0.50.

Southcross Energy Partners LP provides natural gas gathering, compression, treating, processing and NGL fractionation and transportation services, according to its website. It also sources, purchases, transports and sells natural gas and NGLs, according to its website. Lower commodity prices compelled Southcross Energy Partners to suspend its quarterly cash distributions, which equaled 40 cents per common unit according to Zacks. Southcross Energy also closed a $14 million unsecured loan. SXE has a 52 week low of $0.42 and a 52 week high of $16.20. Today’s close was $0.50.

Atlas Resource Partners LP is an exploration & production master limited partnership which owns an interest in over 14,500 producing natural gas and oil wells, and also is the largest sponsor of natural gas and oil investment partnerships in the U.S., according to its website. Atlas Resource announced in November that it would cut its annual cash distribution from $1.30 to 15 cents per common unit, according to Zacks. ARP has a 52 week low of $0.56 and a 52 week high of $11.26. Today’s close was $0.58.

A broker must have reasonable grounds for each recommendation made to investors considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a firm offers a security to its customers, the firm must conduct due diligence, that is investigate the facts surrounding the security, to confirm that it is suitable for any customer of the firm. The suitability of an investment for a particular individual is at the center of the investment process and one of the key fiduciary duties owed by a firm and its broker to the customer. A firm may be held liable for its failure to recommend suitable investments to its customers.

If you invested in a master limited partnership, and have experienced investment losses, please call us at 844-689-5754 or complete our “contact form.” Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.

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