One good day does not a trend change make, but it’s still notable that MLPs found some  overdue market relief Wednesday following the Kinder Morgan (NYSE: KMI) dividend cut, even as oil and gas prices faded again.

This sneak peek at one of the features that will be included in December’s issue of MLP Profits provides the vital leverage stats as well as known 2016 spending and financing plans for the largest MLP operators. It than proceeds to recommend some option plays based on my view that this is indeed the bottom.

In a panic that has multi-billion-dollar pipeline equities trading with the volatility of penny stocks, knowledge is power. It can provide the courage to swoop in on a fire sale, or impart sufficient confidence to hold on while others cut and run.

Midstream providers made the bulk of their 2016 spending commitments when crude was still above $100 a barrel, and natural gas prices far higher than today’s. Now they’re having to selectively follow through despite the handicaps of plummeting equity prices, higher debt costs and fraying profitability.

That’s made their ability to deliver on those commitments a key litmus test; call it the Kinder Morgan  criterion. Getting shut out of the equity market and not being able to take on additional debt leverage forced that giant to slash its dividend by 75% this week. It was a vicious cycle in which the further the stock fell the worse its funding prospects looked. No one is looking to repeat the experience.

To help subscribers buy bargains and not headaches, I’ve compiled the debt, yield, liquidity and known 2016 financing needs and means for eight key midstream complexes. None is as overextended as Kinder was before its cut, but some (hello, Magellan) clearly offer a greater margin of safety than others (Plains All-American, for example.)

It’s worth keeping in mind that the entire sector is, like Kinder Morgan, a victim not only of the current dislocations but of the limits they’re imposing on future growth. Its financing and business prospects will certainly look quite a bit better once energy prices and equity prices bounce back. But they will probably never look as promising as they did before the last year transpired and, as Kinder Morgan showed, lower equity prices can become the cause of even lower equity prices. It’s fair to expect the extreme pessimism gripping the sector to eventually lift; just don’t expect the new normal to look anything like 2014.

Shifting from generalities to specifics, Energy Transfer Equity (NYSE: ETE) seems subject to the widest range of potential outcomes. Not only is its outlook for 2016 clouded somewhat by the pending buyout of Williams (NYSE: WMB), but it’s also the head of a large MLP family featuring two of the largest partnerships and several smaller affiliates.

The failure of either Energy Transfer Partners (NYSE: ETP) or Williams Partners (NYSE: WPZ) to line up affordable equity financing could force ETE to backstop them by deferring some of its claims on their cash flow. With ETP and WPZ currently yielding at least 12% while crude is at $37 a barrel and gas at $2/mmBtu, that’s hardly an inconceivable scenario.

On the other hand, those concerns appear to have been more than fully priced in with ETE’s unit price down 63% between June 15 and Dec. 7, ahead of a 13% bounce Wednesday. Energy Transfer Equity has a 16% year-to-date distributable cash flow cushion and expects its distributions from affiliates pro forma for the Williams merger to increase 25% next year, so there’s plainly upside here as well, especially once energy prices start to recover.

While debt leverage is expected to jump from the current 3.3 to 5.3 pro forma for the merger, next year’s expected rapid cash flow gains could push it back into the 4s in short order. We continue to view ETE units as a core recommendation and a Best Buy at these levels.

Meanwhile, Magellan Midstream (NYSE: MMP) is as safe a bet as they come thanks to extremely conservative financial management and the good fortune to earn its money largely from handling the still surging volumes of refined fuels. It’s the master limited partnership with the strongest fundamentals, and accordingly has been discounted less than most others.

The sickest giant in the midstream space now that Kinder has plugged its cash flow leak is probably Plains All American (NYSE: PAA), which depends especially heavily on shipping crude and profiting from regional pricing differentials that have dramatically narrowed or vanished altogether.

PAA’s yield is above 12% as well, but it should still be able to finance its heavily reduced 2016 capital spending plan. The most intriguing of these, acknowledged by the partnership for the first time this week, is the possibility of merging with its general partner.

Energy Transfer Equity (ETE)

Debt/EBITDA: 3.3 (5.3 pro forma for Williams merger, per Moody’s)

Current equity yield: 7.7%

Distribution coverage: 1.09 Q3; 1.16 YTD

Liquidity profile: $17.7B pro forma total debt after merger. $1.9B pro forma on secured credit line due Dec. 2018. Bank commitments to $6B one-year secured credit line (interest capped at 5.5%) to finance cash portion of Williams purchase; ETE has option to extend line for second year.    

2016 funding needs: Modest capex at Williams (WMB) and for prep work on Lake Charles LNG, but has pledged to support affiliated partnerships as necessary

2016 funding plans: $4.9B in forecast 2016 distributions from affiliates pro forma for merger is mostly earmarked for distributions expected to increase ~20%.

Energy Transfer Partners (ETP)

Debt/EBITDA: 4.5

Current equity yield: 12.3%

Distribution coverage: 0.84 Q3; 0.97 YTD

Liquidity profile: $22.5B debt, Undrawn $3.75B unsecured credit line due Nov. 2019; to receive $2.2B in pending dropdown of retail operations into Sunoco (SUN).   

2016 funding needs: ~$5B for capital spending

2016 funding plans: Modest at-the-market issuance to supplement Sunoco dropdown proceeds, willing to move debt/EBITDA to 5x. Could sell its 40% stake in Lake Charles LNG.   

Enterprise Products Partners (EPD)

Debt/EBITDA:  4.1

Current equity yield: 6.4%

Distribution coverage: 1.25 Q3, 1.33 YTD  

Liquidity profile: $22.5B debt at effective interest rate of 4.8%, $4.7B in consolidated available liquidity mostly under unsecured credit facility due Sept. 2020, $750M notes maturing in Feb. 2016

2016 funding needs: $3.2-3.5B for capital spending

2016 funding plans: Debt/EBITDA could rise to 4.25x, but also likely to tap current $1.9 billion at-the-market equity sales authorization.

Kinder Morgan (KMI)

Debt/EBITDA: 5.8

Current equity yield: 3.0% (based on reduced 2016 dividend)

Distribution coverage:  1.00 Q3, 1.07 YTD

Liquidity profile: 42.5B net debt, $3.4B available on $4B revolving credit facility due Nov. 2019; $1.7B in 2016 and $3B in 2017 maturities

2016 funding needs: $4.2B for capital spending

2016 funding plans: $3.8B in retained cash flow, rest in debt

Magellan Midstream Partners (NYSE: MMP)

Debt/EBITDA: 2.8

Current equity yield: 4.8%

Distribution coverage: 1.32 Q3, 1.36 YTD

Liquidity profile: $3.4B long-term debt at average interest rate of 4.7%, undrawn $1B revolving credit facility due Oct. 2020  

2016 funding needs: $650M for growth capital spending

2016 funding plans: Debt and retained cash flow exclusively; no equity issuance expected

Plains All American Pipeline (NYSE: PAA)

Debt/EBITDA: 4.5

Current equity yield: 12.6%

Distribution coverage: 0.79 Q3, 0.88 YTD

Liquidity profile: $10.6B debt, $2.3B of liquidity at outset of 2016 on secured and unsecured credit lines

2016 funding needs: Reducing capital spending to ~$1.5B

2016 funding plans: Typically funds 55% of growth capital spending with equity and rest with debt but considering alternative financing options including asset sales. Also on the table: a possible combination with general partner Plains GP Holdings (PAGP). A Dec. 8 management presentation noted the “simplification” is no sure thing, with discussions still in the “very early stage.” The same presentation assured that “no distribution reduction is forecasted” for 2016.

Spectra Energy (NYSE: SE)

Debt/EBITDA: 5.0 consolidated with Spectra Energy Partners (SEP)

Current equity yield: 6.2%

Distribution coverage: 0.89 Q3, 1.45 YTD

Liquidity profile: $14.2B total debt consolidated with SEP; $3.1B available on consolidated $3.7B of credit lines

2016 funding needs: $2.8B for growth capital spending

2016 funding plans: Typically finances projects 50/50 with debt and SEP equity; secure SEP transmission cash flows have left it with a cost of capital advantage (current 6.1% yield) over rivals with exposure to gathering and processing.

Targa Resources (NYSE: TRGP)      

Debt/EBITDA: 5.0 forecast for 2016 pro forma for merger with Targa Resource Partners (NGLS)

Current equity yield: 11.6%

Distribution coverage: 1.10 Q3, 1.06 YTD at NGLS  

Liquidity profile: $6B total debt pro forma for NGLS merger; $1.5B available on consolidated 2.3B of revolving credit lines; no notes maturities before 2018

2016 funding needs: $600M for growth capital spending

2016 funding plans: Targeting 50/50 debt/equity financing split

Betting on a Rally

The heavy losses absorbed by MLPs in recent days amid widespread bearishness about the midstream sector’s prospects have tilted the odds in favor of a decent snapback rally that could extend into 2016.

Aggressive speculators could capitalize on the prospective near-term turnaround as well as the longer-term recovery with the following option plays:

Energy Transfer Equity (NYSE: ETE)

Jan 15 2016 $10 calls below $5.30

Jan 20 2017 $10 calls below $6.50

EQT Midstream (NYSE: EQM)

Jan 15 2016 $60 calls below $11

Magellan Midstream Partners (NYSE: MMP)

Jan 15 2016 $60 calls below $5.40

Targa Resources (NYSE: TRGP)

Jan 15 2016 $25 calls below $7.50

Jul 15 2016 $20 calls below $13