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EV Energy Partners LP Message Board

  • moneyonomics moneyonomics Jun 13, 2013 6:54 PM Flag

    fyi-most E&P mlps reverting to a higher yield-look at linn today and others over time including evep

    msg 30692 of 30692 at 6/13/2013 5:05:53 PM by

    MattZN from mlp investorvillage board

    In response to msg 30691 by clambo view thread
    Re: LINE just got ugly with volume
    I do think that the volatility is masking longer-term trends towards normalization. EVEP's yield is moving similarly. But, for example, over the last month OKE has actually dropped more than LINE has (though not as much as EVEP). OKE is a large-cap GP that isn't even remotely near the E&P space. The similarity is that OKE had run up a huge amount, to the point where its yield was scraping the bottom of the barrel.

    Because of that I believe that what we are seeing in the medium and longer-term is as much a normalization effect as it is an interest rate effect.

    As to WHY many names in the E&P space is sitting in the 10%+ yield range, the answer to that is obvious: Because due to debt/leverage levels and a lack of cash-flow, that space has become the most sensitive to interest rate changes. And I'm not talking long-term debt here (though that definitely matters). I'm talking their revolver plus any floating debt they might have. Bluntly speaking, investors are pricing these issues with the expectation that they will have to reduce their distribution.


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    • Money, are most of the smart posters over at InvestorVillage now?

    • These revolvers are based on libor and libor is not increasing. Libor is a fed funds issue and fed funds is going to be low for a few more years, at least. No matter the markets fears.

      I don't think that normalization is occurring when the long term pricing on the commodities that the EPs sell has not stabilized within a range. This is particularly an issue with wet gas. Matters are still developing. Everyone rushed to do wet gas. It's pricing has crashed for obvious reasons. Hence, exports are being developed. When, they are in place, the price of wet gas will go up and normalization will be closer to realization. We are still a few years away from that. Might even get a modest bump on dry gas along the way.

      When, all of this happens, the topline revenue numbers on the EPs will increase, the unit price will increase, the yields will go down. Again, a couple of years or maybe 18 months.

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