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Atlas Pipeline Partners, L.P. Message Board

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  • bosox_pats bosox_pats Oct 31, 2011 10:08 PM Flag

    Nov. Distribution

    I would swap my APL shares for ATLS shares at this point (I only own ATLS). ATLS IDR's will be 100% in the money as soon as this 4Q given the strength of APL's cash flow. ATLS distribution will probably rise from $0.24 to $0.27 in 4Q and then ramp to $0.35-0.40 given the timing of payments from APL to ATLS. ATLS is currently covering it's distribution by 1.6X. I believe they are going to use some of this excess when it spins off 20% of E&P business into a new MLP. (The IDR's ATLS will own with new MLP are structured almost exactly the same as APL - IDR kicks in at $0.45 distribution per quarter). Once ATLS becomes a pure play IDR GP MLP play, it will be able to distribute nearly all it's DCF. Given the leverage to the IDR's, it should trade at a premium to APL, perhaps down to a yield of where it is trading right now. Lastly, I think ATLS will create value for ATLS unit holders with 20% spin out of E&P business - it will quickly cover the ex-dividend gap of spin-off as it takes it DCF coverage down from 1.6X to something closer to 1.1X. You have the potential for 1 + 1 = 2.5.

    So, by the 1Q one could have a $1.60 annualized distribution for ATLS, and if it trades to a 4% yield, the units have upside to $40 over next 6 months. Furthermore, the GP of APL, ATLS, owns over 5 MM units of APL and the management of the GP (the Cohen clan), owns mostly ATLS units of around 800,000. You may not like them, but they are money makers, and I would want to own exactly what they do as this story evolves...

    Perhaps the trade is to swap a portion of APL units for ATLS units. You can swap 1:1 and take some money out of the trade at same time given the dollar price difference while getting more upside per unit.

    In any case, a very bullish story developing across the Atlas trio of companies......

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