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Atlas Energy Group, LLC Message Board

  • bosox_pats bosox_pats Aug 25, 2013 11:38 AM Flag

    Hostage to 10-Year Bond

    MLPs, REITs, Utilities and other high yielders hostage to 10-year bond. ATLS more susceptible given lower GP yield. However, as the Distributions accelerate, ATLS will power through this headwind. Year-end distribution will be running at a $2.40+ annualized rate. I think we are looking at a $65 - 70 unit price to yield 3.5% assuming 10-year is range bound between 2.5 - 2.75%

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    • While I agree that distributions will power ahead, I'm not sure I agree with the 3.5% yield. E&P risks only get you a 1% premium to 10 year government bonds???

      • 1 Reply to davidbdc2001
      • I believe we are looking at a distribution of $1.90 for 2013, $2.85 in 2014, nearly $4.00 in 2015. There is no MLP with this type of distribution growth. There are a couple estimates of $5.00 in 2016. Plus, ATLS is the only pure play GP with both exposure to E&P and Pipelines, somewhat of a natural hedge. Even at a 5% yield, one can get to a $100 unit price over the next couple years, perhaps sooner. The market is a forward discounting mechanism, typically about 9 months at a time.

        I suspect the economy is not accelerating like many had hoped. Recent macro statistics suggest continued 2% growth vs 3% or better. The entire market has lined up behind a 10-year moving up to 3% or higher. My experience is when everyone lines up behind the same trade, the better bet is a bond rally that takes the 10-year to 2.25% near term. In that tape, ATLS will rip higher to $65 - $70 over the next 6 months.

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