MASTER LIMITED PARTNERSHIPS

Wednesday, October 29, 2008

You have to love Ass-ociated Press calling the Atlas (APL) haircut today a "dip"!

6 comments:

Anonymous said...: This has been announced before, but here is official announcement:

pasted from http://biz.yahoo.com/bw/081029/20081029006418.html

EV Energy Partners Announces Increase in Cash Distribution

Wednesday October 29, 4:37 pm ET

HOUSTON--(BUSINESS WIRE)--EV Energy Partners, L.P. (Nasdaq:EVEP - News) today announced a cash distribution for the third quarter of 2008 of $0.75 per unit for all of its outstanding units. The distribution represents a 34 percent increase over EVEP’s prior year third quarter distribution and a 7 percent increase over the distribution for the 2nd quarter of 2008. The distribution will be payable on November 14, 2008, to unit holders of record at the close of business on November 7, 2008.; 10/29/2008 5:53 PM
Anonymous said...: Did anybody catch the Barton Biggs interview (by phone) on CNBC yesterday? He said that just as we've witnessed panic selling in the recent (and very painful) past, he expects the next phase of volitility to be caused by panic buying. I've often asked myself if it's more painful to be in the market as it drops or not be in it as it rises. Personally, I cope better with the former. That said, when it comes to MLPs, it's time to back the truck up.

Lee; 10/29/2008 10:16 PM
Anonymous said...: Wachovia reiterates buy on APL the day after Citi downgrades to sell. The plot thickens...

APL: Go Ahead, Take A Bite - Reiterate Outperform Rating
Overreaction Presents A Buying Opportunity

Reiterate Outperform - Sell Off Overdone. APL was down 16% yesterday (10/29) versus a gain of 1.5% for the Wachovia MLP Index. The weakness is primarily due to APL being downgraded to a sell rating by an analyst who cited the possibility of a distribution cut due to low commodity prices. This is not really new news. As we've noted previously and as management themselves have stated if crude oil prices were to remain below $70/Bbl for a prolonged period, the current distribution level would likely be unsustainable. Based on our 2009 oil forecast of $80/Bbl, we believe that APL's distribution remains secure. Additionally, with 2008 coverage likely to approximate 1.0x (even if current commodity prices persist), management has until at least April when the Q1'09 distribution is declared to make a decision regarding APL's distribution policy, in our view. Crude oil prices could very well improve in the meantime, allowing APL to add hedges and lock-in cash flow to support the current distribution (estimated crude oil breakeven price of $75/Bbl versus $68/Bbl currently).

Potential Distr. Cut More Than Priced Into Valuation. The market appears to be pricing in a larger than warranted potential distribution cut for APL based on current commodity levels. Assuming no improvement in commodity prices in 2009 (i.e. a crude oil price of ~$65/Bbl), we estimate APL could potentially reduce the distribution level to $2.90/unit from $3.84/unit currently to generate a 1.0x coverage ratio. Based on the current price, this would suggest a yield of 18.1% for APL vs. the median yield of 13.1% for gathering and processing MLPs. Applying the peer group yield to a potentially reduced distribution (i.e. $2.90 for APL) suggests a unit price of $22 for APL, or 37% upside from the current valuation.

APL Safely Within Debt Covenants. APL is bound by its credit facility to maintain a debt-to-TTM EBITDA ratio of less than 5.25x. Our model suggests crude oil would have to fall to $60/Bbl for a sustained period of time (four consecutive quarters) before APL's leverage approaches its debt covenants. Notably, if commodity prices were to remain at current levels through 2009, we forecast a debt-to-EBITDA ratio of 4.8x. Importantly, this forecast does not reflect potential steps management could take to improve liquidity.; 10/30/2008 7:29 AM
joewxman said...: did this wachovia story hit this morning or yesteday?; 10/30/2008 7:40 AM
Anonymous said...: hit this morning. Must be in reaction to citi downgrade; 10/30/2008 8:06 AM
Anonymous said...: Lee, Biggs said stocks were cheap 6 months ago. I guess eventually he'll be right -); 10/30/2008 9:08 AM