This week, we published a new white paper and companion webcast where I discuss our view of the MLP sector in this transition year. The white paper can be found here, and the webcast can be found by clicking this link or by clicking on the picture below.
In summary, we think most MLPs have options (a broad toolbox) available to them that will enable most of them to maintain distributions and their high-payout business models in 2016, and we’ve seen many of them pursue those options early on in 2016. We view 2016 as an opportunity for MLPs to prove the durability of their businesses without the benefit of an endless supply of cheap capital. We expect overall distribution growth in 2016 (on a market cap-weighted average) as a result of the largest MLPs continuing to grow distributions even as others hold flat or even cut distributions.
Over the longer term, we believe MLPs have an opportunity to transition to a more sustainable business model currently employed by a select few MLPs that is characterized predominantly by less aggressive leverage and payout strategies that result in lower reliance on the fickle capital markets to fund development. In addition to improved financial management, we believe the winners that will emerge will be those with scale and integration or strong support of a financial sponsor.