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EV Energy Partners LP Message Board

  • ottoblockhead ottoblockhead Nov 14, 2011 7:21 AM Flag

    Citi Raising Target Price to $100.00 per Unit

    Below is a summary of their report issued today:

    We are raising our target price to $100.00 per unit. Utilizing a sum of the parts valuation, our target price assumes applying a 10.0x EV/EBITDA multiple to our adjusted EBITDA forecast of $279.6 million (i.e. on a four quarter rolling basis; over the next twelve months; adjusted for cash paid to General Partner, the result of incentive distribution rights, non-cash and other items) for the base assets, which equates to $54.00/unit. We then add $46.00/unit for our estimated value of the Utica Shale assets. Our valuation of EVEP’s Utica Shale position, assumes applying a value of 1) $13,000 per acre for 50% of the partnership’s acreage in the wet gas window, and 2)$3,000 per acre for the remainder of the acreage primarily located in the oil window.

    We rate EV Energy Partners, L.P. Buy (1) with a 12-month target price of $100.00/unit. We believe the units offer investors a relatively attractive yield supported by an active commodity price hedging program and the potential for distribution growth over time through the addition of production and reserves. EVEP should appeal to income-oriented investors seeking exposure to commodity prices. In our view, EVEP has built an impressive acquisition track record over the last several years under the auspices of parent company, EnerVest. In addition, EVEP has shown resilience during the financial crisis by managing its leverage and overall financial flexibility. That said, in the short term, we continue to expect a fair amount of volatility due to uncertainty in the broader markets and in the economy.

    Medium to long term, we believe the investment proposition for EVEP is favorable given: 1) strong portfolio of internal development opportunities, 2) the potential for further drop-down acquisition opportunities from EnerVest, 3) relationship with parent company, which provides the partnership with a wide breadth of expertise, 4)
    aligned interest as the parent company has a significant ownership stake in the partnership (i.e. 22% of aggregate common and subordinated units) in addition to the 2% general partner interest, and 5) attractive average hedged prices relative to the peer group over the next 4 years. Thus, we urge investors with a longer
    investment horizon and tolerance for volatility to look strategically add to or build positions.

    Our current 12-month target price for EV Energy is $100.00 per unit. Utilizing a sum of the parts valuation, our target price assumes applying a 10.0x EV/EBITDA multiple to our adjusted EBITDA forecast of $279.6 million (i.e. on a four quarter rolling basis; over the next twelve months; adjusted for cash paid to General EV Energy Partners, L.P. (EVEP) Partner, the result of incentive distribution rights, non-cash and other items) for the base assets which equates to $54.00/unit. We then add $46.00/unit for our estimated value of the Utica Shale assets. Our target multiple assumption for EV Energy is at a slight premium to the peer group average target multiple pf 9.75x and reflects our view that EV Energy should be valued as a growth through acquisition story, has a strong parent company with significant dropdown potential, and has demonstrated an ability to grow through acquisitions.

    Good Luck!

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    • Did you see my earlier article on BHP? There could possibly be a JV or outright buy from them on some acreage. They are spending a ton of money in the Natural Gas windows in the good old USA.

    • Walker is a pretty streight shooter but EVEP has a foot print in so many plays that the swaps would probably be in another Shale location.

    • I don't think so rancher. According to what Walker has said on several occassions, nothing is going to be done with the Utica until, at the earliest, H2 2012. Part of the reason for the wait is so that enough test wells can be drilled to accurately define the
      prospects in the field particularly the oil potential. By waiting for the data to be fully documented, EVEP probably gets a higher price for the acreage.

    • That is a possibility but swaps for income producing properties and/or JV's could shorten that timeline considerably.

    • There is sort of a conundrum in the Citi forecast. On the one hand the report states that it will take more than a year for EVEP to monetize the Utica assets and on the other hand the $100 price target, as you state, is a 1-year target.
      I think that the monetization has to occur for the stock to have a big move so my price target is 18-24 months out. I am not convinced that we will see $100 before Utica is valued in a deal.

    • Which will take years.

      Remember, Citi's target price is for 12 months.

    • Wonderful news! Helps explain the Recommendation Summary* of 1.5 to 1.3..that's just outstanding! This may be a tad OT, but not really. It happened to me last week.

      What I found amazing (This concerns Eagle Ford) was the immense amount of fracing activity just between San Antonio and Corpus Christi along I-37. A farmer paid $800 an acre a few years ago. Now Flex Frac, Turner Industries Group, TriCan, etc. are paying $2,200 an acre just to Drive Across the land to get to the wells..and they are everywhere. Big, Brand New Wells that weren't there just a few months ago. Farmers selling acres outright are getting huge amounts. 18 wheelers with large containers of what looked like water, trailers to acommodate workers. Flex Trac has a billboard with a "$5,000 starting bonus" right under their name. Getting out and seeing for yourself is the only way to go if you have the time.

    • I meant what your last sentence states.

    • $3,000/acre in the oil window doesn't make sense. $16,000 would make better sense.

    • this analyst should be fired as he is a complete idiot.
      1. Walker has already stated that the $15,000 per acre price that CHK got for the its gas acreage "set a floor" so why does the analyst use $13,000.
      2. acreage in Eagle Ford in the oil window has gone for over $30,000 per acre and this jerk is using $3,000. Walker has also implied that the findings in the test drilling in the oil window have been favorable.
      The target price should be somewhere between $125-$150 but the analysts have no guts to put out a number like this and would rather move it up step by step.
      he
      he target price

      • 3 Replies to statesrip
      • Perhaps you need to look in the mirror.

        Do your homework and you will note that Citi has been on target since this was on their radar for a long time coming. If I recall, this was a "Top Pick" in 2008. Where were you then?

        But by all means, if you think the guy is wrong...sell your position, if any, and move on ;-)

        This board was much more pleasant before all the short interest and day traders jumped on the band wagon. We won't miss you any...

      • The analys used $13,000 plus another $3,000 for the oil which gives $16,000. This is a fair analys for someone that doesn,t have a dog in the hunt.

      • Now tell me how you really feel about this analyst.... I agree he is not going out on a limb.

        FYI, in the detail of the report (see below) he does state there is significant upside to the oil play.

        Utica Shale Position Value of $46.00 per Unit: Given that the Utica Shale is an emerging play, there are a select few transaction comparables available to use as an anchor for our valuation. That said, our valuation of EVEP’s Utica Shale position, assumes 212,000 net acres (i.e. 158,000 net working interest acres and adjusting for the ORRI on 240,000 net acres) and a value of: 1) $13,000 per acre for 50% of the partnership’s acreage in the wet gas window, and 2) $3,000 per acre for the remainder of the acreage primarily located in the oil window. Notably, EVEP has very little acreage in central Ohio, which at this point is not considered to valuable, at this point. According to our calculations, total value for the Utica shale position is $1.6 billion or ~$46.00 per unit. Certainly, should the oil window prove to be more prolific there could be considerable upside to our estimates.

        Best regards.

 
EVEP
38.22-0.03(-0.08%)Sep 17 4:00 PMEDT

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