Solid business fundamentals will likely improve credit profiles for several energy master limited partnerships (MLPs) in the U.S., reports Standard & Poor's Ratings Services. With oil prices floating near $60 per barrel and gas close to $7 per million Btu, MLPs' midstream activities have recognized major benefits, especially from growth in drilling activity. Also, refining capacity is tight and demand is robust for gas liquids. A contango crude market is also assisting gatherers and storage operators. "Although a correction in energy prices could occur due to higher inventory levels and increasing production, midstream infrastructure constraints should allow most MLPs to perform well in 2005," says Aneesh Prabhu, an S&P credit analyst. S&P now rates 19 MLPs in the energy sector, mostly in the BBB and BB categories. "Although the activity base of each partnership is unique-ranging from pipeline operations to propane and heating oil distribution to oil and gas exploration and production-the ownership structure and high cash-distribution rates required under this form of legal organization create more similarities among these entities from a credit perspective than business-line differences might suggest."
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