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Eagle Rock Energy Partners, L.P Message Board

  • normanisela normanisela Dec 25, 2013 1:04 PM Flag

    EROC Can Soar Now for Years to Come!

    I really think this is a smart move by Eagle Rock, and investors holding on should do well over the long term. The upstream MLP space has been an excellent area for income-seeking investors over the past few years and I'd expect to see Eagle Rock become a much more stable income producer in the years ahead. While the company did just cut its distribution earlier this year, that cut was easy to spot because of the company's debt and because its midstream business' cash flows were not as secure as others in the space. With those two weights now lifted, Eagle Rock can soar along with its oil and gas production as it has plenty of capital to both buy and build production growth in the years to come.

    Sentiment: Strong Buy

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    • Divesting of assets is rarely a good sign! Frankly I don't recall what led me to this trade (I'm in at $7.55) but I now doubt I'll ever be fortunate enough to reach the break even point. I guess there is always a reason behind the higher distribution rate, huh. Until now, I've been very fortunate playing these E&Ps. My only regret is RGP didn't purchase the whole of EROC! I've got much bigger chunks of ETE and ETP.

    • That's just wishful thinking. The midstream provided more stability to the cash flow. Now that is gone, they become one of the smallest E&P MLPs and the one with the worst track record and so likely to be awarded among the highest yields in the sector. Yes, they may have funds now to pick up some new properties but we have to wait and see. Based on the current distribution (assuming no change for now) and awarding them a 12% yield which is the current going rate for small E&P MLPs with questionable management, the price would be $5. So the current price of $6.35 includes an extra 25-30% based on hopes of what they might do better going forwards. I see that premium at least partially evaporating pretty quickly. It's hardly reasonable to give EROC a better valuation than stable and larger E&P MLPs with proven management track records. Suggesting it "can soar for years to come" implies you think it will be given a better valuation than every other E&P MLP out there and is just silly and wishful thinking. If they pick up some good properties and have a road map to higher distributions then that could provide some boost to valuation, however for now I think we have to assume the price will soon be back in the $5s. By no stretch of the imagination are they the best E&P out there so why on earth would you think they get the best valuation? On the contrary they can easily claim to be the worst with the only exception being CEP which hasn't been able to pay a distribution in years.

      • 3 Replies to lizahuang54321
      • Liza, you don't even know what you are talking about... Upstreams build out midstream because no one else will do it for them. Devon exploded when it formed a JV midstream MLP with XTEX. In that case Devon plans on having the new MLP to be its midstream build out asset without having to consume its own working capital.

        Reading between the lines, it appears EROC plans to have RGP be its captive MLP with respect to as much of its future midstream build out as possible. Anadarko does this with WES.

        EROC may not have only turned the corner in terms of balance sheet strength no one appears to be discussing this issue of having more working capital for E&P if it no longer engages in building out its own midstream.

      • Liz you have given such bad advice in the past. I really admire the way you give it however

        Sentiment: Strong Buy

      • na, liz is not a paid basher, yes a basher at times, at least that's how she comes across

        but liz, the question here is, why did you not sell at 12.
        why buy at 5 unless you see the price recuperating going forward,
        according to your earlier statement .............with so many better investments ...........

    • normanisela,
      Agree with you.
      Beware that at least one paid basher is here everyday to slander this company for greedy gains, possible hired by crooks & criminals to do their job.

      Sentiment: Strong Buy

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