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QR Energy, LP Message Board

  • p.celsus p.celsus Mar 30, 2013 4:08 AM Flag

    time to move up

    every other upstream gas producer has moved big time, even the really #$%$ LRE -- so it looks like it will be QRE's time to play catch up

    at current prices LRE has yield almost identical to QRE, but it had insufficient profits last year to pay the distribution... in the earnings call the mgmt was asked about strategy going forward and said they were going to focus on improving coverage ratio rather than payout... but don't do like i say, do like i do... because then they went ahead and raised more funds in a SPO meaning that their coverage ratio is now even lower... if you price LRE on EBIDTA/share it's now way more expensive than QRE

    a recent article in seeking alpha points out that QRE's sales are hedged to very large extent... (about 90% for this year) but then seems to suggest that LINE might be a better investment because it is 100% hedged... can anyone explain this to me? why would 100%-hedged 8% p.a. be BETTER than 90%-hedged 11%?

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    • It is just my opinion but buying into a heavily hedged upstream e&p company, in a downturn economy for hydrocarbon fuels is not a good bet. The mid-streams are as far as I am going to go, and they better have hedged or they will lose their shirt on transport costing.

      Sentiment: Hold

      • 2 Replies to disabledretiree
      • but the economy isn't sending any downturn signals... and price of gas has been rising.

      • not sure I agree/understand, retiree- better hedged than not in a downturn hydrocarbon economy, no? Unhedged means market price is what you get so if prices start falling, so will the cash flow thus distribution, whereas hedged companies can maintain distribution (at least, until hedges run out). Its when energy prices turn up that hedges limit potential return (unless they hedge with puts but lets not go there, as anyone in LINE knows about LOL)

        as for pipeline operators- much of their return is contracted at a price/volume piped, not on the market price of what they pipe, so much less a commodity price play than unhedged (or even partly hedged) upstream MLP's

 
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