I actually think the GP is a screaming buy right now. Ignoring the obvious high yield. NRGY is a very sound business especially after the sale to SPH. I have worked in the Asset Management/Trading area of the physical and financial natural gas market for almost a decade and can tell you they have extremely good assets. I have personally delt with almost all facilities. They are highly strategic to the today's and the future gas market. Yes most are now held in NRGM but NRGY hold 75% of those shares and also has IDR's as well. Long range forecasts for winter 12/13 are trending colder and colder. Even a modestly cold winter will bring gas prices and more notably spreads to higher and wider levels. The sale to SPH is virtually leaving NRGY debt free...and i know it is somewhat of an oxymoron...Underlevered. This will enable NRGY the flexibility to acquire other midstream assets or sell the GP to NRGM(would not surprise me). Now if the sale doesnt go through there is a silver lining...the coming cold winter. Propane prices are down significantly and tend to track crude...but...you are now starting to see a decoupling. All of the shale drilling is unlocking liquids which is beneficial to the retail and wholesale propane consumer...wholesale propane is now trading under a $.90 gallon compared to $1.47 a year ago. Low Propane price coupled with cold or even a normal winter mean higher revs. So while i like the sale, i won't be to disappointed if it doesn't go through. The asset only gets more valuble with higher ebitda. One other issue. I read the seeking alpha MLP DCF author and enjoy his stuff but I think he fails to look forward with his analysis...it only focuses on the present. A normal winter will bring higher DCF ratios. I have went on too long and wont bother to spell check. Hope this gives you another reason. Have a good weekend
The issue as I see it though is the IR splits in NRGM create a higher cost of capital, which is going to slow their ability to expand going forward vs other MLPs.
The NRGY/NRGM split today after the SPH sale is just a stange financial engineering situation that is going to hold back the businesses. Even if NRGY sells all of it's NRGM units and goes pure play GP, it's not set up for high growth.
Thats why the market is forcing current yield so high. IMHO management needs to just recombine the two entities and elminate the IDR, they realistically aren't doing anyone anything and are holding growth back.