2 Moneymakers for the Fiscal Cliff Fallout
MEMP, ATAX look bullish as investors flee to tax-free high-yieldersMemorial Production Partners LP
By Bryan Perry, Editor, Cash Machine | Dec 5, 2012, 1:06 pm EST
MEMP is a newer name that just raised its payout, putting it near an 11% yield. This MLP is a Delaware limited partnership that owns and acquires oil and natural gas properties. Currently, it has mature, legacy oil and natural gas reservoirs in Texas and Louisiana, and will soon close on a property in California.
Acquisitions are a big growth driver for MEMP. The company acquired five properties in its first year of operation, and just last month signed an agreement to acquire and gas properties in offshore Southern California from Rise Energy Partners LP. This field has a production reserve life of about 25 years, about 14% of MEMP’s total reserves, and is immediately accretive to distributable cash flow.
Being a secular bull on natural gas, I’m also attracted to the fact that MEMP’s production of proven reserves stands at 533 billion cubic feet, composed of 1,611 gross (692 net) producing wells from more than 50 fields and 25 different geologic horizons, 79% of which is natural gas before the most recent acquisition. That number will come down a bit, but the emphasis on the gas side of the equation is attractive.
With a market cap of 380,600,000 and price of 17, there should be about 22.4M units right now.
The 10.5M units to be sold represents a 46% dilution. After the sale, the dividend will drop from $1.98/share to $1.34/share unless MEMP management increases the cash used for dividends. That, and the fact that the new units are priced at $17 caused the price drop today. You have to decide if the future gain is worth today's pain.
no need to worry about dilution with such a small amount of shares, it's a good season of the year for a public offering and the pain shouldn't last long.
'Memorial Production Partners LP (MEMP) is offering 10.5 million units representing limited partner interests as the company looks to raise funds for a pending acquisition of oil and natural gas properties. The limited partnership had 16.9 million common units outstanding as of Oct. 31. Units slipped 3.1% to $17.50 after hours.'