EV Energy target raised to $71 from $52 at RBC Capital
RBC Capital raised its target on EV Energy (EVEP) as the firm expects the company to benefit from Chesapeake Energy's (CHK) report on its initial Utica shale drilling results. The firm maintains an Outperform rating on EV. :theflyonthewall.com
Best move for EVEP to quickly realize the value of its holdings for partners would be to convert to a C corporation. Atlas (ATN) did this a while back.
Nick (fortunate to be in at 16.00/unit)
"And, of course, if the Utica is good, it's going to hit $100."
I have no way of knowing, as you do not, but I would say $120 or more is possible.
Meantime, this is worth holding on to. In my opinion. Since the jury is our on Utica but there are positive signs.
I view my MLPs as I do bonds or preferreds, a source of steady income. I am looking for income and inflationary unit price appreciation. That's it. So, BBEP is fine with me without much cap app. But, I suspect someday it's going to move.
What I meant is some of us have incredible gain in EV as we bought during the credit crisis and on the way up out of it.
So, monetizing some of that gain is possible. If you go to the sale analyzer at the tax support site, you can get a sense of what percentage of any gain will be cap gain tax rates. I just did that and it's around 90% of the gain will be cap gain rates. So, not too bad on tax.
A person could monetize a portion of the gain and redeploy. Actually, I think it's still too early to do that. I think EV has more room to move.
And, of course, if the Utica is good, it's going to hit $100.
For all my insistence that EV is still an income business and ultimately monetization is going to hit the bottom line in further distribution increases, it does presently have an element of growth stock valuation.
You are right, but unless you are the markets greatest timer you will not get any appreciable capital gains. I owned BBEP for two years, finally sold it and made a buck or two, however the dividends were nice. Personally I like a fair dividend and a nice steady increase in the value. 15% capital gains are not hard to live with.
Fair enough. I agree on the 12 months, but think things will start smoking after a year. If they trade drilling rights for already producing properties, then the distribution could jump quickly after closing. If they get cash, then they are going to have to go shopping. For the part of the assets that turns into long term increase in production thru participation in drilling results, that will provide incremental cash flow for years.
Again, monetizing personal cap gains is just that, a personal matter. Taxes are always a consideration, but getting some cash if basis is low and repositioning is always a possibility.
You can move from EV to BBEP and double yield right now.
Are you saying you don't expect distributions to rise in time? I think that's one of the most assured outcomes. Whatever, the means of monitization, it ultimately results in more income producing assets. That income will be passed through to unit holders. Admittedly, there will be a lag, perhaps a substantial one. To get this right is going to take a period of evaluation and further data gathering from well production. Then, deals have to be done, which takes more time. But, Enervest and Chesapeake have a good long term relationship.
I agree with this. I did not mean to say they will shift models away from MLP and pass-thru. Just that at this point, investors can expect, or hope for, growth stock-like returns. It will surely remain an MLP unless bought outright. Any thoughts on that?