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Eagle Rock Energy Partners, L.P. Message Board

  • PhanManLover PhanManLover Apr 5, 2010 2:44 PM Flag

    Out of EROC

    Just sold out of EROC today @ 6.5. Realized a nice 31% return from 11/2009 through today.

    My reason for selling was simple. While I think the recap. is a bad deal, it will ultimately go through.

    The mid-range of the annualized divy is 0.5 and dividing this # by 6.50 gives a yield of 7.7%. I think that is reasonable yield going forward, and see little upside in the stock price in the next 3 months.

    I'm plowing my profits into other MLPs including ENP CQP.

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    • Uhm you guys forget that even if this bad deal goes through, you will have the right to purchase 1/3 of your shares at a huge discount >$3 and you will get another 1/3 in $6ish warrants. This on top of an increase in distribution.

      Dont get me wrong, I prefer they just hold tight and pay off debt slowly but the point is that either way its a good deal. My 10,000 shares become 13,333 at a discount, and if eroc climbs over $6 then the warrants become positive and I can sell or execute those for more profit. Of course, if EROC dips under $6 those warrants become worthless but that is extremely unlikely given the current level of NG prices. I fully expect prices to climb by the time the warrants come calling.

    • I remember recently with HLND the opposite was true. The puny management offer was rescinded before the vote and a better one made. It was a straight cash buy-out. I recall that the new offer was a couple of bucks more per unit on a similar share price to EROC. It wouldn't have passed without the better offer.

      I don't doubt that most large investors look to short-term gains. However, you have to ask yourself, which vote outcome would lead to the biggest short-term unit price gain. I don't think a "no" vote brings down the price. I think it would make it rise. I also think a "yes" vote will raise the price too, but a smaller amount.

    • FWIW, here's what Barclays says, "In our most recently published note, we estimated $0.65-$0.80/annualized distribution supported by EROC's current asset base."

      Take the low end at $0.65, and that would mean a yield of 10% at a price of $6.50.

      Of course Barclays could be wrong.

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