The Perils of Investing in Master Limited Partnerships
Historic Lows in Oil Prices Cause Investors’ Woe
The oil and gas industry has been hit hard by low prices over the past few years. Oil prices hit historic lows this year and even though prices have rebounded a little, at $50 per barrel oil is still just half of what it was three years ago.
According to the Wall Street Journal, about 70 U.S. oil and gas companies filed for bankruptcy protection in 2015 and 2016. Multi-billion-dollar companies like SandRidge Energy, Linn Energy, and Breitburn Operating all filed for bankruptcy protection in May 2016 alone.
What does this mean for investors?
Many of these oil and gas companies were organized as Master Limited Partnerships (MLPs) or Limited Partnerships (LPs). In many cases, investors were told by their brokers that these partnerships would offer tax advantages and were told that oil and gas companies provided a safe haven during turbulent markets. Many investors were told to invest in oil and gas firms because commodities like oil would supposedly do better than the U.S. dollar during periods of inflation.
In many cases, investors were not told about the ups and downs of the oil market. And they were not told just how risky oil companies can be.
Furthermore, the tax advantages of MLPs and LPs were really oversold by a lot of brokers. Most investors would have been better off investing in more established oil companies like ExxonMobil or BP.
Why did your broker recommend these risky companies?
In some cases, brokers sold expensive shares in oil partnerships because of the big commissions the broker earned. Selling ExxonMobil or BP wouldn’t have earned him those commissions. A broker who advises his client to buy an investment because of the commission that the broker earns is not really looking out for the best interests of his client. But that’s what occurred with many of these investments.
If your broker recommended that you buy SandRidge Energy, Linn Energy, or Brietburn Operating, or recommended that you buy shares in other now-bankrupt oil companies, including Samson Resources, Ultra Petroleum, Halcon Resources, Sabine Oil & Gas, Energy XXI, Midstates Petroleum, and Quicksilver Resources, then we would love to hear from you.
We will analyze whether your broker was trying to help you or whether he was trying to line his own pockets. We will also analyze whether your broker put too many of your eggs into one basket. Did they put too much money into oil companies, leaving you overexposed to this market downturn?
Those are the kind of questions Bartle & Marcus and The Law offices of Jared Rose are investigating and will help you answer. We will make sure your legal rights are protected. Contact us today.