ExxonMobil’s (NYSE: XOM) blockbuster bid for XTO Energy (NYSE: XTO) marks a coming-of-age for natural gas in North America.

With one Super Oil in the game, others are likely to follow. That promises to transform the industry in a few years from a patchwork quilt of small- to intermediate-sized producers into one more resembling the oil industry, dominated by a handful of financially powerful giants.

Prices for few commodities have been as volatile as those for natural gas over the past several years. That’s historically been a huge deterrent to potential users of the fuel.

Thanks to a massive building boom in the late 1990s, some 22 percent of US power is currently generated from natural gas. But unregulated power producers live in perpetual fear of not being able to pass through fuel cost changes in a free market, a circumstance that dragged Calpine Corp (NYSE: CPN) into bankruptcy in mid-2005.

Most regulated electric and gas utilities are allowed to pass changes in fuel costs through in rates automatically, many without officially filing for an increase. But a fuel-cost induced spike in rates can bring down just as much customer anger/opposition as a critical rate filing for building out needed infrastructure. And more often than not, one will doom the other.

The coming of the Supers may not end this period of intense volatility in natural gas prices. But it does bring a degree of financial power to the sector that will increase confidence of gas consumers, large and small. Coupled with the ever-increasing finds of shale energy, that should ensure greater use of natural gas in coming years.

Asset Builders

One group of certain beneficiaries: energy infrastructure master limited partnerships (MLP), the purest plays being our Conservative Holdings.

These MLPs derive most or all of their cash flow from assets that earn fees based on either usage/throughput or leasing capacity. The former fluctuate due to the level of energy demand, hence economic activity. The latter are steady unless the lessee defaults on the contract.

Fee-based cash flows are the most secure in the energy sector, aside from regulated utility monopolies. Even during the darkest days of the recent recession, our Conservative picks’ distributable income–the account from which distributions are paid–was steady because of existing projects, while newly built and acquired assets pushed their earning power higher. The result was balance-sheet strength and distribution growth.

Enterprise Products Partners LP (NYSE: EPD) completed a transforming merger with the former TEPPCO Partners LP and lifted its distribution for the 21st consecutive quarter, a boost of 5.7 percent over the past 12 months. Genesis Energy Partners LP (NYSE: GEL) has now raised its quarterly payout 17 consecutive quarters for a year-over-year boost of 9.3 percent.

Kinder Morgan Energy Partners LP (NYSE: KMP) lifted its payout by 2.9 percent in 2009 but expects a nearly 5 percent increase in 2010, as it’s continued to successfully add assets. Magellan Midstream Partners LP (NYSE: MMP) has set up for accelerating distribution growth by absorbing its former general partner (GP) and adding a raft of fee-generating assets.

Spectra Energy Partners LP (NYSE: SEP) has raised its payout every quarter since its late-2007 inception and by a sizzling 14.3 percent over the past 12 months. And Sunoco Logistics Partners LP (NYSE: SXL) has now lifted its distribution 17 consecutive quarters, 10.4 percent over the past year.

Those are outstanding numbers, and they’re likely to accelerate in coming years as gas use climbs. Enterprise, for example, put its new-found scale as America’s largest MLP to good use this month, acquiring a 212-mile natural gas liquids pipeline system in shale-rich Louisiana from Chevron (NYSE: CVX).

In management’s words, it was a “relatively modest capital investment,” a statement revealing of the wealth of cash-generating deals now available to Enterprise. In fact, CEO Mike Creel recently hinted there are several projects he’s considering in the $200 million to $600 million range. That’s money that would have been challenging to raise a year ago, but Enterprise is now set to keep cash flow and distributions on an upward track though 2010 and beyond.

Kinder Morgan already has 25,000 miles-plus of pipeline in North American intrastate and interstate markets, and it continues to build more of this fee-generating asset. The Fayetteville Express pipeline–a joint venture with Growth Holding Energy Transfer Partners LP (NYSE: ETP)–has won Federal Energy Regulatory Commission approval and is set to enter operation at the end of 2010. That will transport gas from the prolific and extremely fast-growing Fayetteville shale region, a likely target of a future ExxonMobil/XTO among many others.

Genesis Energy is likely to turn on the jets in coming months, thanks to the acquisition of the controlling interest in its general partner by Quintana Capital. According to those familiar with the situation, Quintana is likely to be more aggressive managing Genesis, very likely dropping down some of its own infrastructure assets and using it as a vehicle for making more deals.

Conversely, Magellan’s absorption of its general partner promises to accelerate growth thanks to a simplified capital structure.

Spectra Energy Partners’ GP Spectra Energy (NYSE: SE) remains one of the most aggressive energy infrastructure companies on the planet–with the partnership a major beneficiary. Spectra is gearing up to boost its infrastructure in the Marcellus Shale region, considered the next big shale development region and already the target of billions of dollars of planned investment.

One project under consideration is a pipeline extension linking Marcellus Shale output in Pennsylvania, Ohio, West Virginia and New York with Northeast markets. The extension would have a capacity of 100 million to 300 million cubic feet a day and could be completed in 2013, just as much of the planned development in Marcellus is slated to bear fruit.

Finally, Sunoco Logistics is anticipating 10 percent-plus distribution growth in 2010 from its current project portfolio. One reason is its expectation for a pickup in the acquisition market, as major integrated oil companies pare down non-core mid-stream assets to take advantages of other opportunities such as natural gas development.

Watch the Price

If there’s a negative on these MLPs, it’s that their unit prices have also been off to the races in 2009. Much of that was playing catch-up from the unjustified beating they took in late 2008. But rising unit prices have also reflected what’s amounted to an acceleration of prospects for growth, as credit conditions have eased and opportunities to buy or build have increased.

The question now: Have these MLPs’ prices at least temporarily outrun their near-term prospects? To date, we’ve said no each time they’ve advanced. Rather, we’ve raised our buy targets to reflect the improved business prospects.

As we said above, there’s every indication that business prospects will continue to improve throughout the coming year. Benchmark interest rates like the 10-year Treasury note yield are likely to rise further as US economic growth revives. But yield spreads between MLP bonds and benchmark rates continue to slide.

Perhaps more important, yield spreads between MLP units and benchmark interest rates are still above historical averages, reflecting lingering recession fears. The spreads should further decline as growth picks up and those fears diminish even more. And because equity is the primary method of MLP financing, that means a still lower cost of capital, and a greater number of asset buys/builds that make economic sense.

Energy prices, too, are likely to be a positive, as revived economic growth pushes them higher, particularly natural gas. That won’t affect profits significantly from the existing assets of Conservative Holdings, owing to the fact that cash flows are fee and capacity based. But it again means more energy development, and therefore more growth projects. And to the extent that throughput and fees are dependent on energy prices, it will lift profit on existing assets as well.

Throw in the still-high and rising yields and Conservative MLPs are still a very attractive package for long-term wealth building. As a result, we’ve elected to raise the buy target for Enterprise Products Partners LP from 30 to 33 and for Kinder Morgan Energy Partners LP from 60 to 62.

Admittedly, these are modest moves. But we’ve comfortable making them in light of both MLPs’ enhanced growth prospects.

In contrast, we’re not raising buy targets at this time for Magellan Midstream Partners LP, Spectra Energy Partners LP and Sunoco Logistics Partners LP. The latter two especially have been huge winners since we added them to the Portfolio. And we have every expectation that all three will continue to reliably build wealth for years to come.

On the other hand, all three have spiked coming into the end of the year, a likely sign that institutions have been buying in. Each of them now yields well below 7 percent, with Spectra Energy Partners dishing out barely half a percentage point more than its general partner Spectra Energy.

Current prices will no doubt eventually be justified by superior business fundamentals. In fact, there’s a good argument they already are. Our view, however, is the prices shown in our Portfolio table are going to retreat once more before they advance significantly. That’s enough reason for us–and you–to show some restraint.

The bottom line: If you’re in the hunt to boost your stake in MLPs, this is still a good time to pick up units of Enterprise Products Partners LP (up to 33), Genesis Energy Partners LP (up to 20) and Kinder Morgan Energy Partners LP (up to 62).

But hold off on Magellan, Spectra and Sunoco until prices dip a bit or business developments justify current levels a bit more.