Isn't $23.11 very close to the 52 week low price? Is it possible there is another factor at work here driving the selling, such as perhaps price per barrel of oil discounts due to a glut in the Midland, TX area, driven by lack of takeaway pipeline capacity? All constructive comments welcomed. Where is the 2012 bottom?
There is a discount between WTI-Midland and WTI-Cushing, and this could be a part of the problem right now. Notice PSE, another Permian MLP is getting hurt now, also. The discount will abate someday, but when that will be, who knows. Hedging is tremendously important now. I suspect that the Permian oil MLPs will be able to maintain distributions, but there will be a period of difficulty. For the long term, a very nice entry point.
The recent purchase of Concho Resc. assets does not seem like a bargain. 5500 bbl./day from 1584 wells at 62% oil is what they would have called "stripper wells" twenty years ago. Their interest rate is way up there on the recent financing deal, I believe their rating is lower than Sandridge (thats saying something and it isn't good). It appears they are 60% hedged for 2013 but that can backfire as evedenced by losses in a recent qtr. that resulted in neg. earnings per unit. Very thin profit margin on this new acquisition.When Legacy gives birth to several million new units the price drop will make todays new 52 wk low look like a bump in the road.
live here in midland tx and the construction and drilling is like nothing ive ever seen in my short 50 years. they seem to be hitting any stock that has recently issued new shares such as ngls which was close to 52 week high not to long ago. as far as the expansion out here it is estimated to last for the next 4 to 5 years. workers are living in makeshift rv parks everywhere in a 25 mile radius, housing is poping up everywhere and land prices are crazy. if someone is sitting in ny making a decission on these wstx assets without seeing whats going on they are total idiots. seems like a bunch of cold feet for those who bought the secondaries. and such is the cost of expansion. they dont leave oil in these tank batteries to sit verylong as they gather it with transport trucks.