Linn Energy (Nasdaq: LINE) and Vanguard Natural Resources (Nasdaq: VNR) are birds of a feather. Both are upstream master limited partnerships growing via acquisition of long-lasting production assets that can be exploited relatively cheaply, and both use extensive hedging to minimize near-term risk from declines in commodity prices.

Linn and Vanguard are really publicly traded merger-and-acquisition teams trying to pick off the most attractive assets with their cheaply sourced capital and debt. Both have made lots of smart and well-timed deals, as borne out by capital gains and distributions growth.

Linn’s units have outperformed the Allerian MLP Total Return index by 36 percent and more percentage points since the 2006 initial public offering, while distributions per unit have increased 92 percent over that span by the time Linn hikes its payout in July if, as expected, it completes the merger with Berry Petroleum (NYSE: BRY).

Vanguard’s share price have risen only 47 percent or so since its October 2007 offering, while distributions have increased 45 percent, the best for that stretch among MLPs, Vanguard points out.

Nevertheless, Vanguard’s units continue to yield 8.4 percent, while Linn’s yield is at 8 percent prospectively incorporating the planned distribution hike in July.

This discount to the broader MLP sector is certainly justified by the increased commodity risk in the upstream space, since hedges typically extend only a few years out while the acquired assets have a much longer productive lifespan. In addition, the potential for sharp moves in commodities and interest rates poses risks for the growth-by-acquisition model, especially when the acquisitions are debt funded. This model works until it doesn’t, despite both companies’ demonstrated success in weathering the 2008-09 crash.

On the other hand, the relatively high yields suggest investors are paying more attention to potential downside risks than others who have driven midstream yields south of 4 percent. Linn and Vanguard retain plenty of upside as a result, and have well-regarded management teams that have delivered in the past.

Linn’s year is off to an eventful start, highlighted by a loud short attack that loudly failed, followed in short order by the even louder bid for Berry, the first time an MLP has inked a deal to acquire a taxed Subsection C Corporation.

The key to that immediately accretive deal turned out to be Linn’s affiliated Linn Co (Nasdaq: LNCO) stock, a holding vehicle for Linn units that pays out a cash dividend instead of an MLP distribution. By agreeing to exchange their Berry shares for those of Lin Co, the selling shareholders dodged a nasty tax hit. Linn is currently the only upstream MLP with an affiliated C-Corp whose shares can be used as an acquisition currency, giving it a leg up in the M&A sweepstakes.

Vanguard has worked smaller deals, but its recent ones have been fortuitously times, locking up big natural gas reserves last year at a time when natural gas prices were deeply depressed. Among its acquisitions were three oil and gas fields in the Permian Basin of New Mexico and Texas overlapping with Vanguard’s prior footprint in the area, as well as properties in Colorado, Wyoming, Arkansas and Oklahoma that were immediately accretive to distributions per unit.

Vanguard has been notably stingy with capital spending, priding itself on getting the most out at least cost and managing debt conservatively as well. Linn has been more aggressive, but has also proven it can cut operating costs.

Operationally, Vanguard had a better first quarter than Linn, though both companies were affected by ethane rejection from some of their gas fields and by the discount on continental crude relative to the WTI and Brent benchmarks.

Linn’s cash flow covered only 88 percent of the quarterly distribution, hurt by bad weather and inadequate infrastructure. But the company remains on track to cover its annual distribution fully, aided by the Berry acquisition. And it just replenished its war chest for future deals with a $1 billion increase in its borrowing facility.

Vanguard’s cash flow barely covered its distribution this quarter, but that was because of accelerated capital spending that will now boost profit. Excluding the sped up $5 million expenditure, coverage would have been 1.13: 1 or so.

The CEO said on the conference call that Vanguard has considered an affiliated C-Corp model akin to Linn’s given its demonstrated popularity, but would first would need to make an acquisition large enough to provide a tax shield for the affiliated C-Corp’s profit stream.

Whether or not Vanguard ultimately goes this route, both it and Linn should continue to realize the cost of capital advantages available to MLPs at a time when many overextended and/or fast-growing exploration and production companies are scouring the Earth for additional resources. It’s an enviable position to be in, as is the position of collecting above-average yields on two cash machines that aren’t slowing down. Continue to buy Linn Energy below $40 and Vanguard Natural Resources below $30.