Register for Client Education Seminar. Learn More »

The Correlation between MLPs and the Oil Industry

by AOG Wealth Management

MLPs are an innovative investment commonly connected with the oil industry.  This article reviews the basics about MLPs.

What is an MLP?

MLP stands for “master limited partnership.” It is a limited partnership that is publicly traded on a securities exchange. It ties the benefits of a limited partnership with the publicly traded securities’ liquidity. Master limited partnerships are limited by U.S. federal law to businesses using our natural resources, such as natural gas extraction, transportation and petroleum. To be able to pass for MLP status, a partnership must be able to generate at least 90% of its income from what the IRS considers as “qualifying” sources. MLPs are required to give distributions to their own unit holders on a quarterly basis. This includes limited partners and general partners.

What is the correlation between MLPs and the oil industry?

U.S. companies that own energy infrastructures are called energy MLPs. This includes natural gas, pipelines, oil, storage, gasoline, processing plants and terminals. Since MLPs need to derive 90% of their revenues from natural resources, they often resort to venturing into the oil business. This is because the gains in the oil industry have been so much higher compared with those in other industries.

Midstream MLPs are those primarily involved in the collection, storage and transportation of oil and gas. They earn their money based solely on the storage and transportation of fuels.

Who is AOG Wealth Management, and what do we do?

AOG Wealth Management is an independent Registered Investment Advisor specializing in managing wealth for individuals, companies and endowment funds. As a boutique investment advisory firm, AOG serves clients by offering investment vehicles typically not utilized by larger wealth management firms by using a four-pillar approach combining investment strategies, tax efficiency expertise, legal / estate planning and risk management. Going beyond the traditional asset classes of stocks, bonds and cash, and employing an endowment-style model, AOG adds up to five non-traditional asset classes with low stock market correlation. Our model forces a “buy lower” and “sell higher” discipline providing asset management services to clients in Northern Virginia and Washington DC – including Arlington, Reston, Great Falls, McLean, Vienna, Leesburg, and Georgetown. For quality asset management, call us at (866) 993-0203 or visit the Web at www.aogwealth.com today.

AOG Wealth Management, Inc. does not provide tax or legal advice. The opinions and views expressed here are for informational purposes only. Please consult with your tax and/or legal advisor for such guidance.

The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation.

Category: Wealth Management