MASTER LIMITED PARTNERSHIPS

Wednesday, October 29, 2008

Atlas Pipeline Partners (APL) and Atlas Holdings (AHD) are down nearly 3 points each with Atlas Holdings (AHD) the bigger percentage loser. There is some sort of citi-group report on the yahoo board saying that Citi is downgrading Atlas Pipeline Partners (APL) to a sell due to the price of crude dropping below 60 dollars could put the distribution at risk.

Now here is the Yahoo profile

Atlas Pipeline Partners, L.P. and its subsidiaries engage in the transmission, gathering, and processing of natural gas. The company primarily provides natural gas gathering services in the Anadarko, Arkoma, Golden Trend, and Permian Basins in the southwestern and mid-continent United States and the Appalachian Basin in the eastern United States. It also offers natural gas processing services in Oklahoma and Texas, as well as provides interstate gas transmission services in southeastern Oklahoma, Arkansas, and southeastern Missouri. Atlas Pipeline Partners owns and operates a 565-mile interstate pipeline system that extends from southeastern Oklahoma through Arkansas and into southeastern Missouri; 7,870 miles of active natural gas gathering systems located in Oklahoma, Arkansas, and Texas; and 1,600 miles of active natural gas gathering systems located in eastern Ohio, western New York, and western Pennsylvania. Atlas Pipeline Partners GP, LLC serves as the general partner of the company. Atlas Pipeline Partners was founded in 1999 and is based in Moon Township, Pennsylvania.

No where in here do is see any mention of crude oil exposure unless he means the the drop in crude will keep nat gas prices low. Anyone have light on this can please share it. It would be appreciated.

MLPS approaching the 220 level up 7 and some change. Thats where they got turned around the last time.

Magellan (MMP) is up 3. Natural Resource (NRP) Energy Transfer (ETP) Sunoco Logistics (SXL) Hiland (HLND) Copano (CPNO) Oneok (OKS) all up 2 or more.

14 comments:

Anonymous said...: Not sure I understand how APL is this vulnerable to falling oil prices either. If anyone sees any other analyst comments on this name, please share.; 10/29/2008 1:16 PM
Anonymous said...: I read the Citi report and disagree with it completely. The crux of the downgrade is the hedging and its effect on future distribution coverage ratios.

Ironically the analyst raises his earnings for this year and holds them steady for next year! He also estimates distributable cashflow for 2008 $206.10, 2009 $238.30, 2010 $270.80, 2011 $371.20, 2012 $414.10 and 2013 $424.50. He also shows total distributions going from $3.79 this year to $4.50 in 2013. Where is the problem?

He states the following "if crude prices average much below $60/bbl for an extended period APL has the potential to violate its debt covenants..." One big IF and one POTENTIAL problem. Is this research?

Mr. Pipes; 10/29/2008 1:30 PM
Anonymous said...: Citi performed various earnings scenarios based on a scale of crude pricing to evaluate impact of APL's revised hedging strategy (reduction to 50% hedged). Results show APL will be pushed to reduce disbursements in 2009 with crude @ in the range of current price levels.

SteveH; 10/29/2008 1:32 PM
Anonymous said...: Maybe it gets cheaper to produce NGL (natural gas liquids)such as eathane,propane and butane from oil instead of gas at $60 a barrel?; 10/29/2008 1:45 PM
Anonymous said...: As a (former) investment professional who was focused on MLPs, I think I can explain.

APL is one of the most commodity exposed MLPs out there right now. They sell NGLs that they produce from the natural gas streams they process. The NGL products have a very strong correlation with crude oil (typically 60% of crude oil prices), since a majority of NGLs produced in America have functions (refining, petrochem) that can be substituted with crude oil byproducts.

Since APL takes ownership and sells the NGLs they process and is forced to buy natural gas to replace the energy content they remove during the processing stage, they are essentially long oil and short natural gas. The last few years have been a golden age for these MLPs as oil has shot up to over 10x natural gas prices (the energy equivalence ratio is 6x). Let me know if that's not clear.; 10/29/2008 1:58 PM
Anonymous said...: Anonymous said APL leveraged to oil:

Thanks for data clarity, but I hate it for being right.

Why does the company not explain it as clearly? Should they issue a warning at this point?

Dave; 10/29/2008 2:18 PM
Anonymous said...: Dave,

Why would they need to issue a warning? Do you have any idea what you are invested in?; 10/29/2008 2:25 PM
Anonymous said...: OK, the blind mice of the fed have made their decision. how many points from yesterday's rally will we give back now?; 10/29/2008 2:27 PM
Anonymous said...: MLPs giving back a chunk of the days gains...nothing new there.; 10/29/2008 2:53 PM
Anonymous said...: MLPs gaining nicely here going into the close.; 10/29/2008 3:35 PM
Anonymous said...: Anonymous said...
MLPs gaining nicely here going into the close.

Really? What screen are you looking at? I see almost every MLP down 1 or more points from today's highs and fading fast...; 10/29/2008 3:58 PM
Anonymous said...: see the relation to commodity prices and hedges in 8-k report,page 26,
"Commodity Price Sensitivity"
at
Atlas Pipeline Partners/
investor relations/
presentations/
sec filings 8-K; 10/29/2008 5:22 PM
Anonymous said...: "I see almost every MLP down 1 or more points from today's highs and fading fast..."

if you want to see an example of something fading fast, try looking at the DJIA which collapsed in the last 30 minutes.; 10/29/2008 5:33 PM
Anonymous said...: The combination of
1)67.00 /barrel,and
2)NG at 5.17 mcf,and
3)NGL at .84 /gal
=distributions decrease to .83 from .96 ,are about the same as a snow balls chance in hell, just my opinion.; 10/29/2008 5:41 PM