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EV Energy Partners LP Message Board

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  • usctriguy usctriguy Sep 3, 2009 11:38 AM Flag

    EVEP vs LINE; Request for input

    Here is the most recent Citigroup research from 08/06/09:

    Citigroup - Equity Research 6 August 2009
    Oil & Gas Exploration & Production (GICS) | Oil & Gas Royalty Trusts/Partnerships (Citi)

    Company - 16 pp.
    Linn Energy, LLC (LINE) Buy/High Risk (1H)

    Acquisition & Re-Hedging Enhances Distribution Safety; BUY

    Richard Roy

    Ben Hopkins

    * Buy Into an Improving Story-"LINE" - Though continued unit price
    volatility should be expected, we urge investors to use weakness in unit
    prices to strategically add/build positions. This viewpoint suggests that
    the investment proposition remains strong (i.e. over time expect growth
    through acquisitions), investors are buying into an improving storyline
    and due to the company's risk management program generally believe that
    the risks to the distribution to unitholders are manageable in 2009, 2010
    and 2011.

    * Announces $118M Acquisition; NOT Expecting Distribution Increase - LINE
    announced that it has entered into two definitive acquisition agreements
    for properties in the Permian Basin. It is important to note that we do
    NOT expect a distribution increase related to this acquisition. Rather,
    we expect management to use the excess cash flows to repay debt and/or
    enhance the sustainability of the distribution.

    * Improved Distributable Cash Flow Profile - Through the re-positioning of
    its hedge portfolio in 2010 and 2011 combined with the acquisition, LINE
    has significantly improved its cash flow profile. As such, we generally
    believe that the risks to the distribution to unitholders are largely
    mitigated through 2011.

    * Raising 12-month Target Price to $23.50/Unit - The change to our target
    price reflects our expectation of higher cash flows based on the recently
    announced Permian Basin acquisitions and the re-positioning of the out
    year hedges. Our current target price assumes applying a 7.5x EV/EBITDA
    multiple to our adjusted EBITDA forecast of $607 million (i.e. next
    twelve months).

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