I think you touched on a critical aspect here. May of these are still far more leveraged than is wise. It is one thing to hedge out forward production and another to assume a management team expert in their business can hedge floating rating borrowings. When things start going bad it is far too easy to accept some risk rather than invest in the necessary insurance which is not fully explained in the GAAP reporting requirements. It is not just the amount of debt but the duration of the debt. There is a great deal of floating rate, secured base borrowing and short term fixed. It is very unlikely that America will allow Obama to continue the insanity of following all the updated policy failures of FDR. Imposing unnecessarily and avoidable economic cost on energy; like destroying real agricultural output, is deflationary rather than inflationary. There are real reasons FDR led America to the worst economic performance of any developed country despite having the economy with the most vast natural potential as proven by WWII. The current production capacity of natural gas will not be constrained until the economy picks up. Possible production capacity is limited only by additional capital investment and government regulation. So price increases from the marginal cost of production will not be sustained over the long term. Therefore interest rates are very likely to be well off these historic lows (real negative) when gas prices firm up. It is well to look at not just the quality of the assets but the stability of the balance sheet. What happened here at EROC is not necessarily in the rear view mirror for companies like Markwest. Individual investors often stretch for yield without fully understanding the risks they are accepting. Especially in these second tier companies that seem to offer inexplainably high distributions.
I have spent a good deal of time pouring over 10ks in the energy area when oil cratered from the peak. I very much like CPNO. But like most on your list there is operational leverage to commodity energy prices which is dangerous as it is paired with too much unstable financial leverage. There is literally oceans of natural gas that have low cost of production so (of course) price spikes will bring on supply line unless the government interferes through something like EPA regulation. Clearly the other management teams on your list did a far better job managing risk than EROC. I think the long term money is going to be made in natural gas transportation and processing. The more retail propane businesses like Suburban and Ferrell Gas are interesting as I believe economics is going to replace fuel oil with gas. Outfits that have existing ‘refineries’ or factionary plants should be big winners as well. When the economy comes back they are going to have remarkable pricing power when the supply margin brings the oil refiners back into the game. It is interesting that some of the best ‘wildcat’ developers are chasing oil rather than gas right now. So if you must have or want exposure to commodity prices, better oil that gas. Was there anything in particular on this list you wanted to discuss?