MASTER LIMITED PARTNERSHIPS

Tuesday, September 16, 2008

AI volume is 1 billion shares...which is 58% of the entire NYSE volume! Astounding!

Down 4 on the mlp index. We uptick with every AIG uptick and every dow uptick.

5 comments:

Anonymous said...: If you guys think MLPs are ugly check out the preferred market. Rumors that AIG is just dumping every Pfd they own. Its a bloodbath.

FedUp; 9/16/2008 3:46 PM
Anonymous said...: EROC Is Cheap After Lehman's Selling

By Jonathan Moreland
InsiderInsights Research Director
9/16/2008 3:45 PM EDT

Looking for long investments using the Form 4 data filed at the SEC usually involves looking for stocks that have insiders buying significant amounts of shares. But the demise of Lehman Brothers (LEH - commentary - Cramer's Take) offers the opportunity to profit from Schadenfreude. Namely, you can take advantage of bottom-feeding in stocks that beleaguered Lehman may be crushing via forced sales.

Eagle Rock Energy Partners (EROC - commentary) is one such candidate. This midstream energy master limited partnership (MLP) fell as much as 20% intraday on Sept. 11 on extremely high volume. Just over 3.1 million shares traded in the open market that day, compared to EROC's three-month average trading volume of 124,000 shares a day.

Well, the Form 4's are in, and it turned out that "Lehman Brothers Holdings Inc" was responsible for 2,470,992 of that day's supply of stock.

Midstream MLPs have shown recent weakness. Concerns about a further economic slowdown have hit this sector. Slower economic activity will likely translate into lower demand for energy. And since MLPs make money on the volume of product pumped through their pipelines, less volume logically should equal less cash flow to pay out to partners.

There is also understandable concern about the ability of these investment-intensive entities to raise funds, which they need to continue the large buildout of energy infrastructure that has been occurring in the States for years.

Both concerns are valid. In particular, a further economic downturn seems unavoidable. So even though I remain bullish on the prospects for midstream MLPs in the long term, the group's short-term selloff is not all wrong.; 9/16/2008 3:49 PM
Anonymous said...: EROC Is Cheap After Lehman's Selling
Page 2

Even so, other MLPs such as Enterprise Products Partners (EPD) and Kinder Morgan Energy (KMR) have "only" fallen 5% to 10% in the past five trading sessions. Eagle Rock's shares are off a much more severe 23% over that time.

Granted, Eagle Rock is smaller than the above two MLP stalwarts, so it should logically be more negatively affected by capital-raising fears. But even other smaller MLPs -- such as DCP Midstream Partners LP (DCM) and Encore Energy Partners (ENP) gave up "only" around 15% of their value. Eagle Rock's units also now sport a notably higher 14.3% indicated yield than its peers after its harder fall.

Even considering the near-term headwinds for midstream MLPs, EROC has arguably sold off more due to the added supply of shares from Lehman. And for any longer-term investors considering buying into this group, this crisis for Lehman could be opening up better eventual total returns in this issue than the normal selloff in the market would have offered.

Keep in mind, however, that an even better opportunity could be forthcoming. That large Lehman sale on Sept. 11 only represented about a third of its position in EROC. Now that it is in Chapter 11, Lehman may not have an immediate need to move its final 5-million-unit block. But these shares will change hands at some point. And if it is in the open market, the overhang will be noticed.

--------------------------------------------------------------------------------; 9/16/2008 3:50 PM
Anonymous said...: BGH +5c A GP that is actually up-its been 2 weeks since that has last happened!; 9/16/2008 3:52 PM
Anonymous said...: NGLS 3.3mil shares traded today

is the seller done?; 9/16/2008 3:55 PM