It’s not unusual for an MLP to end up treated like an unloved stepchild by its birth parent. Whereas one getting taken in by a caring corporate step-parent would constitute an unheard of happy ending.

Add a long spell in between as a broke, homeless and seemingly hopeless mess and you have the makings of a soap opera tearjerker.

And yet that’s the route Sanchez Production Partners (NYSE: SPP) actually took on the way to its current status as the preferred midstream operator and financing vehicle for one of the largest crude producers in the Eagle Ford.

Ironically, getting abandoned by its original utility sponsor in 2009 may have prevented the MLP, then called Constellation Energy Partners, from subsequently making the same pricey acquisitions that ended up bankrupting most of its upstream rivals in recent years.

It still took a 1-for-10 reverse split 18 months ago to keep the shares out of penny-stock limbo. But by then SPP had already found a new sponsor in Sanchez Energy (NYSE: SN). It’s been a mutually beneficial relationship so far, with SN helping to transform SPP into predominantly a midstream logistics MLP. SPP in turn has helped SN raise capital toward a transformative recent leasehold acquisition in the Eagle Ford that should pump additional volume into its gathering lines and gas plant.

Source: Sanchez Production Partners

Midstream operations are expected to account for some 70% of this year’s cash flow.  SPP expects to earn enough to produce 1.3x coverage on a distribution currently yielding an annualized 13.5% and likely to increase 6% this year. If the partnership were to forego the partial payment-in-kind option on its pricey preferred equity stopgap, the coverage would drop to 1.0x. The $500 million in preferred equity must be redeemed over the next five years. Although  its common equity is currently worth less than $170 million, Sanchez Production Partners ought to be able to refinance on better terms given its modest debt leverage and strong growth opportunities.

Key to that growth will be the aggressive drilling plans of sponsor Sanchez Energy, which expects a 50% production boost from its pending $2.3 billion leasehold acquisition from Anadarko Petroleum (NYSE: APC) adjacent to SPP’s current service area. Output is expected to jump another 25% next year, crude prices permitting. But Sanchez is now one of Eagle Ford’s largest and lowest-cost operators, and has secured a private equity investment to finance its expansion.

Discounting the upstream oil and gas production cash flow entirely and assuming higher outlays to preferred investors in the years ahead we still end up with a yield of 8% or so fully backed by midstream assets under long-term contract with the sponsor. And there’s meaningful upside here from higher oil prices ( as well as downside should those head significantly lower, of course.)

We’re adding Sanchez Production Partners to the Aggressive Portfolio. Buy SPP below $17.