This month’s top picks for new money include an undervalued, fast-growing energy producer, Linn Energy LLC (NSDQ: LINE), and a rapidly evolving leader in the midstream business, Energy Transfer Partners LP (NYSE: ETP).

Both are solid values yielding upward of 7 percent with considerable upside for the rest of 2013.

More conservative is Energy Transfer Partners, which operates pipelines and other midstream assets with little direct commodity-price exposure. The MLP’s fourth-quarter results were extremely solid, marking yet another quarter of growth and increased stability since the company began its dramatic transition from propane distributor to midstream giant.

Distributable cash flow (DCF) hit a record USD488 million, a 53 percent increase from year-ago tallies. That was good enough to cover the long-standing quarterly distribution of USD0.89375 per unit by a 1.82-to-1 margin, which equals a payout ratio of 55 percent. Full-year DCF–the primary measure of master limited partnership profits–was USD1.49 billion. That was an increase of 29 percent from 2011 and provided distribution coverage of 1.39-to-1.

Since its sale of its propane distribution assets to AmeriGas Partners LP (NYSE: APU) last year, Energy Transfer’s propane income has come from straight dividend distributions. That’s made earnings considerably less seasonal and predictable, though winter is still a high point for gas midstream.

This year’s gains were in large part due to asset growth, from both new construction such as the Lone Star natural gas liquids venture and acquisitions. The company also merged with the former Sunoco Inc after the latter shed its refinery assets. These assets include the general partner interest of a former MLP Profits Portfolio Holding, Sunoco Logistics Partners LP (NYSE: SXL).

Breaking it down by operations, fourth-quarter profit from the Intrastate Transportation and Storage segment was 14 percent lower than a year ago, primarily because of a 15.1 percent drop in natural gas throughput. This appears to be due mostly to temporary factors that should reverse later this year.

Midstream cash flows dipped 10.4 percent as well, but the shortfall was more than made up with a near triple in Interstate Transportation and Storage profit, a 12.5 percent gain in Natural Gas Liquids Transportation and Services and new revenue streams from Sunoco Logistics and Retail Marketing. These are basically additions of new fee-generating assets, reducing the importance of margin-related operations that can be affected by ups and downs.

Looking ahead to the rest of 2013, volumes may remain challenged for natural gas. And non-fee based operations may also suffer. The liquids business, however, appears on track to continue boosting profit, as new assets come on line under contract.

General partner (GP) Energy Transfer Equity LP (NYSE: ETE) has stated its intention to eventually merge Energy Transfer Partners with Regency Energy Partners LP (NYSE: RGP). This would most likely happen with Energy Transfer Partners as the acquirer. That’s one reason we continue to hold Regency in the Portfolio, despite the recent shortfall in distributable cash flow.

Last month the GP announced it would drop down the gathering and processing assets to Regency that it acquired with the purchase of the former Southern Union. That adds to Regency’s scale and profitability, though it also increases that company’s hedging needs.

Coupled with Energy Transfer’s own considerable capital spending plans, the prospect of merging with Regency may postpone the long-awaited resumption of the MLP’s distribution growth.

The important thing, however, is that cash flows already clearly support growth, and the current yield is secure.

Energy Transfer Partners is still a buy up to 50 for anyone who has yet to take a position.

Linn Energy’s unit price has been relatively weak over the past few months. Softness in its industry overall has taken a toll, as price differentials due to transportation bottlenecks in North America have crimped some producers’ profits.

The bigger blow came with allegations of accounting irregularities that resurfaced in a Barron’s article questioning management’s hedging strategy and true profitability. And the result was selling momentum that took the unit price down as far as USD34.27 on Feb. 19.

Since then, however, bears have been seriously chagrined by two major events. In fact those who bailed will want to seriously consider taking positions again.

First, Linn posted another round of solid numbers with its fourth-quarter and full-year earnings release.

Average daily production rose 88 percent for the quarter, reflecting the successful integration of four big acquisitions completed in 2012, mainly from cash-strapped BP Plc (NYSE: BP).

That translated to a boost of 35 percent in cash flow, adjusted for one-time items. And distributable cash flow covered the payout by a 1.07-to-1 margin for the quarter and 1.14-to-1 for the full year.

The improvement in DCF was especially welcome, as Linn had failed to cover its distribution earlier in 2012. The best news, however, was the company’s 42 percent boost in its proven reserves in the ground, as it recorded a reserve-replacement ratio of 869 percent.

This growth continued Linn’s heretofore successful transition from being mostly a gas producer to primarily a liquids-focused company. And it reflected the continued success at its key Granite Wash play. The company also continued its successful hedging program, with an average realized selling price for oil of USD93.63 per barrel and USD5.21 per thousand cubic feet for gas.

Linn’s biggest news was the blockbuster USD4.3 billion all-stock acquisition of Berry Petroleum Co (NYSE: BRY).

The merger continues the consolidation of North America’s energy patch, which is enjoying a record drilling boom but is also experiencing wild pricing discrepancies due mostly to varying access to energy transportation infrastructure.

These will eventually be worked out, and pricing will normalize. But in the meantime smaller producers such as Berry are hard pressed to maintain the profit margins necessary for development.

By adding Berry’s reserves, which are 75 percent oil, Linn gets more regional scale as well as long-life, low-decline, mature assets that will immediately raise overall production 30 percent. It also increases Linn’s proven reserves (which have a 90 percent or better chance of development) by 34 percent and increases the liquids portion to 54 percent of overall assets in the ground.

Linn’s current estimate is the Berry purchase will add USD0.40 per unit to distributable cash flow. Management announced an immediate flow through to unitholders in a 6.2 percent distribution increase.

That’s expected to be effective with the May payment, assuming timely completion of the merger in the first half of 2013. Management expects a post-merger coverage ratio for the second half of 1.2-to-1, with cash flow secured as always by its hedging strategy.

There’s no question hedge accounting adds a layer of complexity for analyzing Linn that’s not shared by other energy producer MLPs, for example Vanguard Natural Resources LLC (NYSE: VNR). And some analysts have looked at Linn’s wells and found them to be on balance smaller and less predictable as well.

The Berry merger’s scale and the nature of the added assets should answer at least some of the concerns on the second count, as it adds what are generally low-decline wells. That point was made by Moody’s, which changed Linn’s outlook to “developing” from “negative” following the merger announcement.

As for the hedge accounting, Linn’s has been the subject of scrutiny in previous years, but never with anything that stuck. And though wide North American energy-price differentials–coupled with soft economic growth–are what amounts to a stress test for all accounting models this year, Linn’s appears to be holding up.

Of course, regardless of how much it hedges and how well it does so, Linn is at its core an energy producer. Although it appears to have locked in prices for planned output through 2017, earnings are ultimately affected by commodity prices.

That’s a risk all investors who buy the units should keep in mind. But so long as Linn Energy trades under USD40 and continues to perform as a company, it’s a strong buy for anyone who hasn’t bought in already.