Crosstex broke news after the close that on first glance sounds like bad news. The company used puts to hedge it gas purchase from El Paso and has a loss of 11 million dollars. It also withdrew its guidance for the remainder of 2005.

"As part of the overall risk management plan related to the acquisition of the El Paso assets, the Partnership acquired puts, or rights to sell a portion of the liquids from the plants at a fixed price over a two-year period beginning January 1, 2006. Because the underlying volumes relate to assets which are not yet owned by Crosstex, the puts do not qualify for hedge accounting and will be marked to market through the Partnership's consolidated statement of operations. The amount of the mark to market adjustment to be recorded in the third quarter is currently expected to exceed $11 million. This amount will not affect Distributable Cash Flow for the year ended December 31, 2005.As part of the overall risk management plan related to the acquisition of the El Paso assets, the Partnership acquired puts, or rights to sell a portion of the liquids from the plants at a fixed price over a two-year period beginning January 1, 2006. Because the underlying volumes relate to assets which are not yet owned by Crosstex, the puts do not qualify for hedge accounting and will be marked to market through the Partnership's consolidated statement of operations. The amount of the mark to market adjustment to be recorded in the third quarter is currently expected to exceed $11 million. This amount will not affect Distributable Cash Flow for the year ended December 31, 2005.
But upon reading the press release the company makes clear that distributable cash flow will be uneffected by this."

So since MLPS live and die by DCF it appears to me that any short term hit the stock takes tomorrow should be contained. Perhaps i'm reading a positive spin into this because i'm long the stock. But the company goes on to say.

"Due to the unpredictability of the potential fluctuations in the put valuation until closing, when hedge accounting can be applied to the put valuation, the Partnership is withdrawing its guidance on net income for 2005. The Partnership will resume guidance on net income in 2006. The Partnership's Distributable Cash Flow guidance remains in place at $49.1 million to $55.5 million for 2005, and depending on the date of the close of the El Paso acquisition, Distributable Cash Flow is expected to increase for the portion of the year the assets are owned."

Note the last line...DCF is expected to increase once they own the assests. The news broke at 5pm and there were no after hours trades. I guess we'll know tomorrw morning but im going to guess we'll take a hit at the open but it should be managable.

Any other views appreciated.

Looked like a washout today in energy and in most stocks as a rally ensued in the last half hour to take stocks off their lows and energy stocks also rallied back. MLPS usually the last to sell off and so they should uptick tomorrow.