heads up to newbies- study CEP history carefully as a possible analog
Assuming divestiture is eventually approved, study Constellation Energy Partners (cep) an MLP E&P history and where they are today (have not paid a distribution since May 2009). what unit holders need to evaluate with this eroc event is how will they fund future growth and at what interest rate/unit price to acquire mlp type E&P assets which they will need to acquire quickly to be a viable long term E&P MLP.
I don't think so, CEP is tiny and leveraged, EROC should have a lot of dry powder after the deal closes. Granted, I have no faith in how they deploy that buying power, why would you believe management will suddenly turn into geniuses? But, one does have to remember than NRG is behind this, they won't let it fail entirely.
coochy you dont think eroc is leveraged (read the press release could not meet debt covenants and if you cannot meet debt covenants what does the size matter). at what leverage cost will they be able to expand? how many new units can they issue and now much will it dilute ability to pay distributions and if you notice they did not say they were going to reinstate distributions at same level. at what interest rate will they be able to fund new debt with what liquidity measures. their scoop et al properties are not traditional E&P mlp assets as they have high drilling cost and fast decline which leads to high maintenance capital as well as need for new development capital. why did they "not" divest the E&P assets and keep the midstream asset. sorry this is not a formula for value creation