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EV Energy Partners LP Message Board

  • distressed_debt_trader distressed_debt_trader Oct 17, 2013 10:18 PM Flag

    Secondary - some thoughts

    From a NAV perspective - this is dilution is pathetic. They did not sell units when stock was at 60 plus to fund mid-stream infrastructure but expected it funded out of utica sale.

    Guess what Utica is now worth 10%--13% less based on dilution independent of anything else.

    These guys are supposed to be smart PE guys - they look more and more like the gang that can't shoot straight.

    So what from the stock/unit point of view.

    Oct 9th - the units were trading where 10%-13% of the company is now priced and bought. Shows amoung other things how thin the stock is. Lets hope the secondary is well placed and guys don't try to flip it up 2-5 points higher.

    If you have owned from 50-60 (I am one of those guys) - this is a pathetic dilution and value destruction. But guys who buy into this dilution will do fine.

    Now there is reduced credit risk - unit holders just got diluted for reduced credit risk. There is no more overhang of a secondary - we just got one 4.5% in the hole.

    Lets see if this sucker recovers to mid-40s.

    The value they - EVEP management - have destroyed is amazing. A total bunch of screw ups.

    Short term trading wise (next 3-6 months) this could be a positive independent of the 5% hole it is priced in. Long term - the NAV and the stock will never see 60 ever again. Sad sad sad.

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    • It is pathetic. And what worries me is the timing. Earnings are a couple weeks away. If they were expecting the stock to move higher on earnings, wouldn't they have waited on the secondary?

    • I have been writing this for moths about the mismanagement of this company which has lead to personal attacks on me by people like "quantron" who views him/herself as some self- appointed guardian of the reputation of this management team. (For all we know he could be an EVEP employee)
      Management juiced up the stock price to around $70 /share last year with repeated assurances of material Utica deals by year-end 2012. As we all know , they failed to deliver and the stock is down over 30% this year.And to compound their mismanagement , as distressed debt" notes above, they failed to raise equity when the stock was much higher last year and instead chose to dilute existing unitholders by over 13% by selling new units when the stock price is near a multi-year low.What sheer stupidity or perhaps they just wanted to attract new investors who might actually make a few bucks on this stock while continuing to "bag" existing unitholders. Management simply doesn't care about existing unitholders

    • The forecast capex spend for the midstream investment is a huge hole that's not being filled by Utica acreage sales. Mgmt got in over their heads and don't want to dilute their midstream interest by not coughing up their capital calls. Classic cash flow mismanagement. I've heard Walker speak at ipaa a few times and really like him, but they royally screwed this up - total shareholder value destruction. Cash flow management 101 - go back to school guys.

      • 1 Reply to oldfaithful58
      • Yes, they did screw up. They over promised and under delivered. They thought the Utica divestiture would materialize quickly. It didn't. Blame some of that on Aubrey McClendon. He hyped the Utica, like he hyped the Haynesville and other plays. Buyers were timid due to so few producing wells and lack of take away capacity.

        I honestly think that EVEP will be doing good if they can divest the rest of the Utica at prices that allow them to get DCF back up to 1.0x or better and also fund midstream. It will be lumpy and unpredictable.

        I think the real disappointment for many is that EVEP will likely end up back being a simple E&P MLP, with typical conventional and a few mature shale play assets. They will likely monetize midstream and redeploy that capital into producing assets. In the end, we'll likely see $4 maybe $4.50 in distributions. But with a 10% yield, that puts you at $45...a nice gain from todays prices, but a far cry from $70 for those poor souls that bought into the Utica hype.

    • As I see it, EVEP is monetizing the Utica to get the distribution coverage ratio back to 1.0x and hopefully boost the distribution down the road perhaps to $4.00/unit or a little better.

      It remains to be seen if they can monetize the Utica quickly enough and for sufficient proceeds to redeploy into solid cash generating assets.

      I don't own any EVEP, but if it trends back towards the low $30's, I'll be a buyer. They don't really have many specific assets that are great, but the Barnett properties are good as are the Austin Chalk properties.

      I think they'll divest the midstream once it is fully built and volumes are ramped up. That should be a good arbitrage in itself.

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