Brad Thomas was a very active REIT enthusiast at Seeking Alpha before he joined the Marketwise family of newsletter publishers with his Wide Moat Research imprint, and it looks like he has now thoroughly embraced the “sell and upsell” strategy of that publishing group — he started with his “Amazon’s Secret Royalty Program” pitch for his entry-level newsletter (Intelligent Income Investor, offered at $49) to build up a core group of paying subscribers, and now he’s upselling them with a pitch for his Fortress Portfolio (supposedly to be priced at $5,000/yr, “on sale” at $1,795 for two years, no cash refunds).

So what’s the big upsell pitch? Well, it’s a more expensive newsletter, but it generally seems to recommend the same kinds of investments he has always liked — Real Estate Investment Trusts, Master Limited Partnerships, and other relatively high-yield investments, though he says his “Fortress Strategy” also recommends “crash-proof income stocks” and “managed futures,” with 17 holdings currently in his portfolio, so perhaps he’s getting into some things that are more complex with this upgrade newsletter.

Here’s the intro from the ad, which gets us started on seeing the current focus of his teasing:

“This Texas-sized energy deal could help you retire rich when it unleashes a trillion-dollar opportunity – while saving America’s energy grid, starting as early as NEXT WEEK….

“It starts with a little-known deal between the White House… the EPA, that’s the Environmental Protection Agency… the Justice Department…

“And an obscure energy-tech company located in a small town outside of Toledo.

“The firm is about to launch a revolutionary new energy project in Texas.

“It’s a radical new kind of ‘green energy’ pipeline.

“And it’s on the verge of changing the history of energy – and human civilization.

“I believe this same opportunity could make early investors rich, too.”

The big picture spiel is mostly about the massive, massive spending underway to “green” the energy business, with big investments to meet climate goals and reduce global reliance on oil and coal. Here’s a bit more:

“Right now the money’s flowing into an obscure corner of the energy markets.

“And this ‘green’ fuel forms the tip of the spear when it comes to the transition.

“No, I’m not talking about solar.

“I’m not talking about wind.

“And I’m not talking about geothermal… tidal generators or renewables.

“Instead, I’m talking about another energy source altogether…

“One most folks would never associate with the green transition.

“The United Nations has called it ‘the bridge fuel the world really needs.’

“The UN’s Energy and Climate Branch calls it ‘a cleaner fuel than coal or oil.'”

So that’s nothing terribly new or exciting, he’s just talking about natural gas — the same basic spiel made by Porter Stansberry in his “two men destroying America” pitch about the need for more natural gas infrastructure and LNG exports. Here’s how Brad puts it:

“… gas burns 50% cleaner than other fossil fuels.

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“And it can power our current grid, using existing infrastructure.

“That’s what makes natural gas the ideal ‘bridge fuel.’

“In fact, the switchover to gas has already started paying massive dividends.

“The IEA reports that switching out coal for gas has already saved 500 million tons of carbon dioxide – already….

“Over the past few years, gas has quietly moved past coal and nuclear power.

“And today it provides more power to our grid than any other fuel. “

So what’s the “trillion dollar opportunity” that Thomas sees coming out of this? Lets’s sample a bit more of the ad to flesh it out…

“We have three big producing regions in America right now.

“They include Appalachia, Haynesville and the Permian Basin in Texas.

“Together these three regions produce 60% of America’s natural gas supply.

“But production is growing faster in the Permian Basin than anywhere else….

“Production is booming.

“But they have no place to store the stuff… and no pipelines to ship it out of Texas….

“Basically, they’re just pumping industrial amounts of the greenhouse gas straight into the air.

“Most of the time it’s on fire.

“And with the buildup in the Permian, that’s where Texas is headed right now.

“As Energy Intelligence reports:

‘Natural gas flaring in the Permian Basin is likely to accelerate through mid-2024… thanks to associated gas volumes that continue to outpace pipeline capacity.’

So the solution, as you might be guessing, is this new “green pipeline”… here’s how he describes it:

“This new pipeline network can transport 2.5 billion cubic feet of natural gas to market….

“Not only do I believe it will solve the backup in the Permian and beyond.

“But it will do so featuring a new energy-technology breakthrough – patented by the same company.

“And it does something almost magical…

“This single breakthrough can scrub as much as 85% of pollutants from the gas about to travel through this pipeline….

“… this breakthrough invention works on any pipeline – including the project in Texas….

“They’ve already signed a deal with the government to disseminate the tech.”

So what’s the story? Thinkolator sez Brad Thomas is pitching MPLX (MPLX), a group that was initially created when Marathon Petroleum dropped its pipeline assets into a master limited partnership (MLP). The “green pipeline” technology is the emission reduction system developed by MarkWest, one of the subsidiaries of MPLX, here’s how they describe it:

“MPLX… has entered into a first-of-its-kind agreement with the U.S. Environmental Protection Agency, the Commonwealth of Pennsylvania and the U.S. Department of Justice to implement design and operating improvements at pipeline launcher and receiver stations. As a result of these enhancements, emissions from these operations are expected to be reduced by as much as 85 percent. As part of the agreement, we are sharing our proprietary designs for ‘pig ramps’ to minimize liquid loss during pig retrieval and information on the installation of depressure systems to reduce the pressure in the launcher/ receiver chamber prior to opening.”

So no, it doesn’t reduce the emissions of natural gas by 85% or “scrub 85% of pollutants” from the gas… but it does reduce the emissions from the pipeline loading and unloading process by 85%. Which is a big deal, and perhaps it will help make new pipeline building more palatable in populated areas of the country (though I wouldn’t hold my breath — I live in a state that has fought new pipelines for decades, and might have had a rough winter if it hard turned out to be extra-cold this year).

The ad implies that this patent will be super-valuable…

“I call this the most important energy patent in a generation….

“This technology could be worth billions or even trillions of dollars.

“One patent can change the world.

“And owning the rights to that patent – that IP – can change your life.”

And he further inflames our greed on this point by citing Howard Hughes, who became the world’s richest man largely because of his new patented drill bit technology for the oil business… so we should probably note here that these “pig ramp” patents, thanks to those agreements with the government, are effectively being licensed non-exclusively, without royalties, to any pipeline developer who wants to use them. I don’t know the back story, whether they’re being compensated in some other way or just see this as a good thing to do for the industry as a whole, particularly because pipeline operators are always under pressure from their regulators and the communities in which they operate, but those patents don’t look likely to be a major economic driver for MPLX.

MPLX does operate a bunch of pipelines, for both crude oil and natural gas, and a network of natural gas processing plants around the country… and they are on the verge of expanding the pipeline capacity for natural gas coming out of the Permian Basin. The particular pipeline that Thomas teases as a “scrubbed gas” pipeline is the Whistler Pipeline, partially owned by MPLX, which has been in service for a couple years but is currently expanding its capacity by about 25% (to 2.5 bcf/day) and adding both another leg to serve Cheniere’s Corpus Christi LNG plant, and they’re also working on the Matterhorn Express to bring gas from the Permian to Katy, TX (near Houston) next year. That’s part of a big expansion in Permian gas pipeline capacity from several operators, including Kinder Morgan (KMI) and Energy Transfer (ET).

And they do generate strong cash flow, like most of the mature pipeline companies — most pipeline owners are partnerships, and they exist to generate high tax-advantaged cash distributions for their shareholders (I should say “unitholders,” MLPs aren’t corporations and don’t have stockholders). In that group, MPLX is one of the largest and looks to be a relatively strong player, their distributions are high and appear to be well-covered by their cash flow, and they’ve consistently grown the distributions over time.

MPLX has a market cap of about $35 billion at $35 per share, and their most recent distribution was 77.5 cents (it was paid a few days ago, so if you buy now you don’t get that). Their next distribution probably won’t be declared until the end of October or beginning of November, and it will probably be a little higher than that… but not necessarily. At that 77.5 cent rate, if we conservatively assume no growth in the distribution, that provides a yield of about 8.9%. I haven’t looked at their tax filings, but for most MLPs the majority of the distribution ends up being a return of capital, which means your tax liability is mostly deferred until you sell the shares (that’s because though pipelines are capital intensive and have great cash flow, they also have huge depreciation charges — most MLPs don’t hold onto or reinvest much of that depreciation allowance into maintenance or expansion, they tend to use share issuance and borrowing to fund their capital projects so they can maximize cash distributions).

Energy Transfer (ET) and MPLX (MPLX) currently have the highest yields among the big MLPs, both near 9%, perhaps in part because of the reliance on natural gas processing — people tend to think of the big interstate crude oil pipelines as being a bit more stable than the natural gas business. There are other distinctions within the group, but if you want to routinely be above average at picking one MLP over another you’ll have to really dig deep into their (often very odd) accounting and make judgements about the demand for transportation in various areas — I have no complaints about MPLX, it looks like a relatively appealing MLP, but I prefer to get my exposure through the Alerian MLP ETF (AMLP), which gives me the whole group and a solid yield (about 8%) and doesn’t require me to handle a lot of K-1 filings at tax time. The biggest holdings of AMLP right now are Plains All American (PAA), Magellan Midstream (MMLP), MPLX, Enterprise Products Partners (EPD), Western Midstream Partners (WES) and Energy Transfer (ET), and I don’t know of any particular red flags for any of those… but I tend to buy AMLP when energy prices fall (which usually brings down all the pipeline stocks, even though they’re not terribly commodity-price sensitive because they’re essentially “toll collector” companies), and I don’t wasting a lot of time thinking about it.

That said, though, MPLX has been one of the better performers in recent years, partly because it had a well-above-average dividend back in 2020. I got back into buying AMLP during the COVID crash, and both MLPX and the S&P Oil & Gas Exploration and Production ETF (XOP), which buys the big energy producers, have outpaced the AMLP ETF and the S&P 500 since that low point. If you buy the index, you miss out on the daydream of picking the best player.

I wouldn’t count on MPLX making you “very rich” because of this one new pipeline expansion, or their pipeline emission reduction technology, but it is a solid oil and gas pipeline partnership that could certainly continue to be above average for the sector. The shares will likely be sensitive to both interest rate changes and energy prices/demand, like everyone else in the sector (they borrow a lot of money, so borrowing costs matter, but their units also have to compete with other high-yield investments, so they often react to interest rates similarly to Real Estate Investment Trusts or high-yield bonds), but the yield is very good right now and they do have some expansion projects that should allow them to continue to raise the dividend in the future, assuming no crash in energy demand.

That’s not all he teases in this ad, though — so let’s see if we can ID his other picks:

“The opportunity in the energy transition is more than just what one company can do.

“My team and I have just finalized our research on two additional energy deals.

“Each has as much, or more, long-term potential as our first deal….

“The second deal included in the report involves another North American energy.

“Again, I estimate that 99% of our viewers have never heard of this company.

“But it has another 500-mile-long “green pipeline” under construction right now.

“And this pipeline represents the next leg of the natural-gas buildout….

“… their pipeline network is about to extend from Canada…

“Right through the U.S. natural-gas fields in Texas…

“To the Gulf of Mexico, where gas can get to any market on earth.

“But from there, this new pipeline will connect all the way to the southern tip of Mexico….

“This new “transition fuel” pipeline will be able to move 1.3 billion cubic feet of gas to market… per day.”

And he includes an image o this new pipeline in his ad…

So we can confirm that this is the Southeast Gateway Pipeline….

Which is an underwater pipeline extension being built by TC Energy (TRP in both New York and Toronto), in partnership with a Mexican government-owned utility group… so presumably Thomas is pitching TRP shares… which are a bit more diversified than US MLPs, this is a midstream energy business that also owns some electric power plants, but the stock tends to be treated similarly to its US cousins — this is another big one, with a market cap near $35 billion, and it also carries a nice dividend yield of about 8%, though the dividend growth for US investors in TRP hasn’t been quite as steady as most of the MLPs (partly because of the Canadian dollar’s weakness). I don’t know much else about TRP, but analysts are predicting a pretty stable future for them, and you can get a pretty good idea of their breadth and strategy from the latest quarterly investor presentation… but the biggest news for TC Energy lately is probably really their plan to split into two businesses, spinning off their pipelines into a separate entity (so TC Energy, which is the much larger part of the business, will be more like a natural gas utility company, while the new Liquids Pipelines business will be a pure-play pipeline operator — mostl likely, TC Energy will have a lower yield and higher dividend growth, Liquid Pipelines will have a higher yield and slower dividend growth).

You can see the presentation of the deal here, it’s not likely to be completed until sometime in late 2024. Seems like a rational spinoff to me, and the whole operation right now has a relatively high dividend yield compared to other natural gas/electricity utility companies who have meaningful “low emissions” power generation capacity, so it might create some opportunities… but that’s just going off of my ten-minute skim of the financials, so I could be missing something. They see their average cash flow for the whole growing by about 5% per year, supporting dividend growth of 3-5% as they stabilize their payout ratios and pay down some debt, so the base assumption should probably be for an 8% yield that grows about 4% per year — which is pretty good, but not necessarily life-changing, and they have had some down years in the past. Analysts and investors were generally not excited about the spinoff announcement a few weeks ago, which is why the shares are down… but that actually makes me more interested in the shares, given the lower valuation, and there was also a nice insider buy by the Board Chair when the price dipped, so there’s at least one little spark of optimism.

And one more stock tease to unravel for you…

“Our third energy-deal opportunity involves another obscure infrastructure firm…

“This company has just signed a lease on 55,000 acres along the Texas Gulf Coast….

“They’re about to drill dozens of massive energy wells all throughout the region…

“But they’re not looking for gas or crude oil… or even steam….

“They’re drilling giant wells not to remove stuff from the ground…

“But to bury stuff back in the ground… specifically pollution from natural gas production!”

OK, so a carbon sequestration project… burying carbon emissions underground, which has been done for many years (though in a lot of cases, those CO2 injections were done in order to pressurize wells to produce more natural gas, not just to bury the carbon emissions).

Other clues…

“The company announced the deal not long ago.

“And it’s now prepared to start pumping up to 1.2 billion metric tons of carbon back into the ground.

“Where is this happening? Right in the Permian Basin in Texas!”

Thinkolator sez that this is very likely 1PointFive, which has leased 55,000 acres in that area to develop a carbon capture and sequestration hub — and that name is a little obscure, I suppose, but that’s only because it’s a subsidiary of oil giant Occidental Petroleum (OXY), which has become Warren Buffett’s favorite oil stock over the past couple years (Berkshire Hathaway (BRK-B) now owns well over a quarter of the company). OXY isn’t a typical kind of Brad Thomas recommendation, though, it’s not really an “infrastructure” firm and it doesn’t pay a high dividend (the yield is about 1%), so I would guess that he’s probably actually recommending Enterprise Products Partners (EPD), which is one of the major midstream MLPs and is partnering with 1PointFive on building the collection network for carbon dioxide and commercializing the business.

Enterprise Products Partners (EPD) is the largest publicly traded partnership in the energy space, with a market cap just shy of $60 billion, so I wouldn’t say it’s “obscure,” but I guess that’s a matter of opinion. They touch just about everything in the midstream energy space, and they are working on some carbon sequestration partnerships… but I don’t see any way that niche could become a measurable part of their business or really impact their cash flow in the next few years, given the fact that it’s very early days in “carbon sequestration as a service” and EPD is already truly massive. Here’s how they describe themselves:

“Enterprise Products Partners L.P. is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and petrochemicals. Services include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage and marine terminals; crude oil gathering, transportation, storage and marine terminals; petrochemical and refined products production, transportation, storage, and marine terminals and related services; and a marine transportation business that operates on key U.S. inland and intracoastal waterway systems. The partnership’s assets include more than 50,000 miles of pipelines; over 260 million barrels of storage capacity for NGLs, crude oil, refined products and petrochemicals; and 14 billion cubic feet of natural gas storage capacity.”

And their financials have been quite stable — dividend growth slowed down dramatically in 2020, but they didn’t ever shrink the dividend, which investors tend to find reassuring. The current yield is about 7.5%. If you’d like more chatter on EPD, I wrote about them following an Oxford Club tease back in June here.

So there you have it, a few ideas being teased by Brad Thomas that basically come down to “high-yielding pipeline companies will benefit, because we need more natural gas for the clean-energy transition.”

None of those look like obviously high-risk or terrible investments, but they’re also not particularly beaten down, so it’s hard to take seriously any claims of “10X potential” from Brad Thomas when it comes to these kinds of investments… at least, not in a short time period (like less than 5-10 years). If you want to have windfall gains on these kinds of energy infrastructure assets, you usually have to buy when they’re a bit beaten down — most of the “huge 300% gains” and the like that are used in Thomas’ presentation came from buying MLPs during 2020, when the oil business was largely shut down due to the COVID-driven collapse in demand, and they did (almost) all do great if you bought then, but if you buy when things are going along OK, you should expect that the dividend will provide most of your gains, and you’ll need to let that dividend reinvest and compound if you want to build an investment in this sector into very large gains over time.

Though, of course, nobody knows the future. Maybe we’ll see energy demand surge, lots of infrastructure get built to export natural gas, and interest rates will be cut in half again, making most of the pipeline stocks perform very well. I would just think of these as high-yield utility-like plays on the North American energy business as a whole, and my baseline expectation would be that the distributions for these kinds of firms, on average, will probably grow at close to the rate of inflation in the future. Let that surprise windfall be a nice surprise if it comes, but don’t count on it at current valuations… remember, assets like big long-distance pipelines don’t get built fast, they consume a lot of capital as they’re planned and built, and they don’t generally change in value that fast unless there’s a major boom or bust in energy prices.

So… interested in any of these higher-yield energy infrastructure companies? Have a favorite that Thomas didn’t tease? Let us know with a comment below… thanks for reading!

Disclosure: Of the companies mentioned above, I own shares of Berkshire Hathaway and of the Alerian MLP ETF. I will not trade in any covered investment for at least three days after publication, per Stock Gumshoe’s trading rules.