To avoid master limited partnership tax headaches, Morningstar suggests the Alps Alerian MLP ETF. Among closed-end funds, it recommends the Cushing MLP Total Return Fund, Kayne Anderson Energy Development and ClearBridge Energy MLP.

Analysts say good oil and gas company fundamentals should benefit the majority of energy stocks and master limited partnerships over the long term while coal consumption declines. Oil and gas drilling and production spending is expected to increase about 15% by year's end 2015, according to Spears & Associates, Tulsa, Okla.

It is also a favorable political environment for master limited partnerships. At year-end 2011, a report by Fitch Ratings said master limited partnerships were "well positioned against economic regulatory risk, and the sector should generate stable operating performance and financial strength in the natural gas pipelines, crude oil and refined products pipeline."

Fitch says master limited partnerships with limited commodity price exposure, manageable ongoing capital expenditures and modest leverage generally exhibit stronger credit profiles. The credit ratings for larger scale master limited partnerships are clustered at the lower end of the investment-grade spectrum ("BBB-"/"BBB"), reflecting a strong incentive to maintain capital market access. Below-investment-grade master limited partnerships may take steps to improve their credit profiles by increasing the scale of their operations and lowering commodity risk.

The way Fitch sees it, North American gas prices should remain low this year because of the lower-cost production of shale gas and the record high levels of gas in storage heading into the winter heating season. But low natural gas prices could prompt increased demand because of coal-to-gas switching for power generation. There should also be moderate demand for refined oil products.

James DiGeorgia, analyst and publisher of the Gold and Energy Advisor (at GoldandEnergyAdvisor.com), says he favors oil and gas companies with lower oil-to-gas production ratios than in the past. Many of these companies are undervalued. But their production is hedged and profitable. Energy companies that gather and process natural gas, however, can be more exposed to commodity price movements than pipeline companies.

Published reports indicate that when the commodity market went bust earlier in the decade, some master limited partnerships in the business of gathering and processing natural gas cut their distributions.        

"Natural gas has always been considered a bridge energy alternative," Di Georgia says. "Most energy companies are focusing on oil and natural gas liquids. There is a trend of more government agencies, including public transportation and some corporations, converting their fleets to use compressed natural gas. The natural gas industry is working with utilities companies to convert home natural gas to fuel natural gas vehicles."

Cunnane, of Nuveen, says that there will be a continued need for the development of natural gas infrastructure. But these projects are expected to deliver lower investment returns. As a result, he prefers to focus on crude oil companies because of continued strong worldwide demand.

"In this environment, we favor those MLPs with exposure to crude oil and natural gas liquids, which are priced off of crude oil," he says. "MLP sectors with this exposure include G&P, upstream, midstream oil, diversified natural gas and marine transportation."
The largest holdings in his fund include Plains All American, Kinder Morgan, Energy Transfer, Enbridge Energy Partners and Enterprise Products.