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Eagle Rock Energy Partners, L.P. Message Board

  • traderlip traderlip Dec 21, 2009 7:46 PM Flag

    Oh Boo Hoo- quit your crying!

    All you goofballs crying like little babies. Nobody seems to be breaking the door down to get out. After hours trades only totaled 9,200. eroc will be a $15.00 stock paying good dividens in 10 months. If it does drop, look at it as a gift, and load up. I will buy a boat load if it drops below $4.

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    • Yea I hear a lot of crying about EROC right now but sometimes I wonder how people treat their own portfolios.

      Its seems to me that the worst case scenario is that EROC reinstates at about $0.65 per share. At the current price that is a return of over 10% on dividends alone and that return will most likely increase over time. There is no risk of bankruptcy. There is no risk of significant loss from dilution as it has been priced in. Now I dont know about you folks for 10% is a great return and there is little risk of pps decrease. On top of that, the reinstatement can very well be higher.

      Ok so lets say for a second that this is not enough to keep you happy. What I cant understand is selling out to move to something that may or may not increase in pps as opposed to an almost guaranteed 10% return per year. How does this make any sense? 1st of all if you are selling did you consider the loss in taxes? Thats a 25-30% cut right there from your gains (hopefully you did not incur similar losses).

      IMHO this is a great stock to be in. If you bought this now it almost guarantees at least a 10% yield for a very long time plus any gains from there on. If you bought this prior to the move then why be so greedy? Hold and enjoy your 20+% yield on initial investment. Why give your money to the government who will only squander it away.

    • Well ryugo, you seem to have lots of arguments against EROC, and I'm certainly not BUYING right now. The fact is that I'm selling SLOWLY.

      Why? Because we're still relatively and absolutely undervalued, like it or not.

      The whole point of this transaction is to reinstate the distribution. Management has been saying all along that it will reinstate the distribution once its sure it won't trigger any loan covenants. This deal puts EROC safely out of the way of trigger loan covenants IMO.

      The problem is that EROC will not reinstate a $1.42 annual distribution. This is impossible with the amount of dilution that we're going to see.

      So valuing EROC should be done based on the the level of distribution that EROC should be able to pay once it has restructured. I've made my own calculation of $0.65 per unit after the dilution, and believe I'm being quite conservative about this (look at my post on "back of the envelope" thread.) I'm definitely open to correction if you see problems with my analysis.

      So the pertinent questions IMO are: 1) what type of distribution can EROC sustain from cash flow, while still funding attractive Growth CapEx? 2) When can this distribution start?

      My estimates are: 1) $0.65 and 2) within 12 months.

      If I'm correct (which I may not be) then EROC should w/in 12 months trade at an industry multiple of its dividend. NG pipeline MLPs yield between 5-10% with the majority being around 6.5%.

      So if EROC can pay a .65 distribution, and is worth 12.5X its distribution (which would be on the lower end IMO)we could be looking at $8.13 per unit AFTER dilution and the rights offering.

      So if you buy 100 units now (doing this for simplification) at $6 you pay $600. You also get 35 detachable rights to pay $2.50 in exchange for: 1) one unit; and 2) one 2 year $6 warrant. So if you exercise these rights, you end up paying a total of $600 + $87.50 for a total price of $5.09 per unit with 1/4 of a free warrant.

      The warrant should be worth $2.13 (if EROC is really worth $8.13) plus time value. So if we say just $2, that equates to $0.50 a unit, which would really give a cost basis of around $4.60 for units possibly worth almost double that much.

    • well this rally is ONLY justified if EROC is willing to reinstate the dividend. As of yet they still have not announced it so whatever.

      I would say without the 35% and div increases 5 dollars is more than enough for eroc.

      I have to look at their cash flow statement for this quarter to determine what happens next of course as this is the most profitable time for them.

      But anyway Think you need to look harder since I still see some potential companies but they already ran up that is why there are no good deals anymore. Not going to disclose any info as whenever I say anything it gets ran up when I still want to buy them. Best to keep my mouth shut and look for a decent dip and not a pump.

      Look its obvious this stock is currently being pumped for a later dump that's why I will not even touch this right now yes yes you can make more money on the ride. But look, try locking in gains. This stock is going up on 10-50k shares being bought at 5%. Too little volume. And then it drops back right down it seems.

      Totally unsafe and manipulated. I only buy stocks that are going down with good valuations not those going up and up and up.

      Buy low sell high not the other way around.

    • I'm not sure that BBEP is worth more than EROC. Just that I'd rather hold BBEP than the market in general (or an MLP in general.)

      EROC has longer term assets than BBEP which require less CapEx, and I highly value that. The minerals business produced FCF with NO CapEx which I value even more highly.

      I guess it's a matter of opinion, but I can find a few upstream O&G producers that seem comparably priced to BBEP, but I can't find any NG pipelines priced as attractively as EROC.

      I think based on the dividend that EROC should be able to sustain after the rights offering that we should be seeing a (post dilution) $6.50-$8 per unit plus a $0.65 annual distribution.

    • and thats why i did nt want to post anything on bbep now its up like 4-5 % as always i should not be posting my trades as it just screws me over from people spying it seems.

      sigh I wanted more for cheap man. bah.

    • well anyway dont get into things that went too high just yet as they might be overheated. I generally try to look for things that have not went too high just yet but have potential.

      DO you know why I dont want to touch anything too risky?

      I dont trust that we are in economic recovery.

      MAIN reason why I bought into nat gas corps was because nat gas was extremely depressed.

      Depressed means bargains.

      Real estate very depressed but the government gave them a bail out so that means it CAN FALL more and needs to fall more unless they inflate their way out of it. BANKS, real estate and etc industry sorry even with all the run up I still say they over priced and over hyped. When gov stimulus runs dry or starts to wither them = dead. If they bail them out more other stocks will be up even more then based on valuation.

      Well the evep play would have been better for me vs eroc if i went all into evep. its at 30 dollars now no point. It should be able to go to like 33-35 in time though but not that much gain anymore in stock price. BUT hey they give 10% yields not bad better than eroc now at this price after 35% of course.

    • erm I know about not only evaluating just the p/e. but I consider p/e as the risk factor. Depending on why the p/e is low as well I look at their history.

      Then I consider their cash flow. If p/e too high I just consider them a bubble right off the bat. I also look at how much they pay their management. If they overpay them I consider them fleecing the stock holder yet again.

      LOOK AT GOOGLE. BUBBLE? I SAY YES. APPLE as well is a bubble mode right now.

      Yes hedges, eroc is pretty much hedged for the next 1-2 years I never said eroc will go bankrupt.

      I just dont like their management right now.
      Well at least you agree with me on the bbep play being better than eroc right now.

      EROC is worth about 6-7 dollars when they give div not before then imo. Right now it met the peak mainly because people expected 35% rewards.
      At this point other companies might be a better buy for me. 10-20% is max for this now for the next 6 months unless it becomes a bubble. Especially if there are no div. increases.

      I think eroc starting to bubble up right now even short term at least. It is over bought for the rewards. Luckily jokes on the buyers as they have to wait now for 1-2 months until things finalize as there are better playing imo.

    • Another thing is that evaluating commodity companies based on P/E is foolishness. I agree that BBEP is a bargain, but you have to look at cash flow, and then you have to look at hedges to see how much of the cash flow is simply produced by good hedges (and when those expire.)

      EROC is attractive because it's selling at about half the industry multiple for NG pipelines. You've got to realize that NG pipelines require little capital expenditure, are VERY long lived assets, and have much lower volatility in FCF than upstream assets. They're a completely different ball game IMHO.

      EROC is currently the most attractive midstream opportunity that I know of. I'd definitely be happy to exchange for another pipeline company with a more attractive valuation, but EROC looks like a good deal to me at this point.

    • Thanks, I'll look over some of your picks. We're obviously swimming in the same waters. BBEP was one of my larger holdings earlier this year right after the sell off. I had a large position at $5.85 and was short the Sep $7.50 PUTS at $2.15. I sold out between $10 and $11 because I thought there were better opportunities elsewhere.

      You should go over to the QRCP or QELP boards and read the rationale for the investment there. This investment is VERY cheap, and has huge amounts of potential. It's basically trading at 1X 2010 cash flow based on QELP's % of Postrock equity. Also some of the loans are so distressed (like bank lines with 14% interest) that there's a LOT of opportunity here simply by paying off high rate debt, and refinancing once things are under control. Postrock will offer a good combination of developed producing reserves, high quality Marcellus acreage, and a pipeline. An EV/EBITDA of 5 would give QELP a HUGE return from here. Basically I see this as the same play as CEP, but somewhat more leveraged, and with a more attractive valuation (but obviously the downside risks of the leverage.)When evaluating these situations the real question is what sort of MOS do you have in a bankruptcy ....no on can answer this question, but I think QELP has more value even in a bankruptcy than it does on the market right now.

      CHCG is a fairly small holding for me. I think it's a good net-net, but I like to hold a basket of 5-10 of these...CHCG is only about 3% of my portfolio.

      GSL has an excellent yahoo message board. If you read the posts there I think you'll understand why this is a good investment. It's basically trading at 1X FCF right now, and its FCF will remain the same so long as its counterparty (CMA CGM) remains solvent. So far it looks like CMA CGM is going to remain solvent, so a 1X FCF multiple (even with a lots of leverage, and assets worth less than liabilities at current MTM prices) seems really unjustified IMHO. I'm not saying this is worth 10-15X FCF, but I do think it's worth at LEAST 2-4X FCF.

      LOAN I'm really fond of (although it doesn't do anything in the market and there's almost no volume). This one could be liquidated in less than a year for over a 100% profit...a share buyback could do even more good for the company. There's not even a cashburn problem here...the company is making money, and might have a good catalyst if it can borrow some money to invest in additional loans (LOAN's entire portfolio consists of senior secured loans with durations of less than one year...with no leverage we'd need to see unheard of default rates on LOAN's portfolio to bring the current PPS above liquidation value.)

    • well one of the ones I am considering is BBEP
      XOM stable but can run about 10% in the near term if you want. There are others.

      BBEP didnt get run up as much as eroc in % so its about p/e 3 dollar for now as well. MUCH better than eroc if you do not count the div. But the div is so low now that it is not even worth considering. So might as well go completely into my better picks for now.

      EROC can still go up another 10-20% though before the bubble comes for this stock.

      BBEP has better p/e right now though so and they are distressed because of a lawsuit so its a good time to go in if you believe they will resolve it. MAIN problem is liquidity as its not good for trading because low volume and they did not reinstate their div yet. I would wait or try to get it for 10 dollars if it gets that low again. But you never know I wanted to get in at 7 dollars but over waited during the summer. BBEP has better profits p/e debt ratios etc. Only thing eroc had going for it was the mining and diversity. They just lost a bit of that aspect though.

      But the economy might also go sour. DO NOT BELIEVE THE ECONOMY recovered. Its all stimulus.

      There is still massive problems with the commercial real estate and banks are holding back foreclosed homes. So it aint over thats why they gave fre and fnm a blank check.

      Those corps that you said jgrif with the exceptions of cep and that ch i dont like cause they are gambles.

      The China play I cannot comment on as I don't have enough info from them.

      CEP is a bit of a gamble but less risky than the others. I did say they were decent from the summer when they were about 2.5 dollars but i was choosing between eroc bbep evep line cep as investments. From a risk stand point it was not worth it compared to the other choices as it was much less healthy.

      The best choice would have been EVEP at 17-18 dollars.
      performance wise to date I would rate them from
      the summer are evep eroc bbep cep(risky)

      LINE(but this is massively stable and got run up already during the summer not much gain at that point) its at a resistance level now can go up to 30 or so and then die down at 7-8% yield.

      Those are my gas/oil plays for stable and 1/2 stable/gamble/speculative corps.

      I also chose svm as a chance to participate in the silver market if it ever gets back to 5 dollars. If not pointless. I was trying to day trade it a little too but wanted to stay long term really but got really nervous as it ran up too high is such a short time 3.5-5 dollars in a week. 6-7 dollars now but gotta lock in gains man. risk management. during the summer they didnt sell any options and now they do.

      BTW peter schiff recommended this stock on cnbc a few months ago after I was researching which one to invest in. But I think it got over priced now.

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