When it comes to the oil & gas pipeline sector, the continued expansion of one’s pipelines are considered by many to be a key catalyst for future growth. With that said, and for the purposes of this article I wanted to note several reasons why I’m staying bullish on shares of Tallgrass Energy Partners, LP (NYSE: TEP).

Company Overview

Based in Overland Park, Kansas, Tallgrass Energy Partners LP acquires, owns, develops, and operates various midstream energy assets in North America and is currently divided up into two segments, its Gas Transportation and Storage unit (which is currently engaged in the TIGT West End Expansion and the Trailblazer Redtail Lateral project), and its Processing unit (which is currently engaged in the construction and acquisition of water servicing facilities).

Potential Pipeline Expansion

On Thursday, September 25, Tallgrass Energy's Pony Express unit said that it was pursuing the potential expansion of its crude oil pipeline system to transport growing production in areas that include the Denver-Julesburg Basin as well as the Niobrara and Codell formations.

According to Carl Surran, an editor at Seeking Alpha, “The proposed expansion, which is expected to be operational in H2 2016, involves the construction of new pipeline facilities to increase the current capacity of the Pony Express crude oil pipeline system by up to 400K bbl/day”. By increasing its capacity by up to 400K bbl/day, not only is there potential for the company to increase its revenues by a fairly considerable amount, there’s also the chance that an increase its cash flows will result in an increase in its quarterly distribution.

Recent Distribution Behavior

When it comes to Master Limited Partnerships one of the first things we need to examine is a partnership’s distribution behavior. In the case of Tallgrass Energy Partners its distribution growth has been fairly attractive since its initial distribution of $0.142/unit back in July of 2013. Since then, we’ve seen its quarterly payout jump from the initial $0.142/unit to its most recent payout of $0.38/share that took place in July of this year.

Not only does that jump represent an increase of $0.238/unit or 167% over the last 12 months, but if all goes well with the proposed expansion of its crude oil pipeline system, and full capacity of 400K bbl/day is realized, I strongly believe we could see the partnership’s quarterly distribution reach $0.45/unit or even $0.55/unit by mid-2016.

Conclusion

For those of you who may be considering a position in Tallgrass Energy Partners LP, I strongly recommend keeping a close eye on the company's pipeline expansion efforts over the next 18-24 months as it should directly impact the partnership’s long-term distribution growth, which has, without interruption, jumped 167% since the company’s initial distribution back in July of 2013.