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Investor's Guide to Enormous Oil & Gas Dividends
 

Investor's Guide to Enormous Oil & Gas Dividends

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Oil and gas MLPs offer investors enormous cash distributions. Some of the smaller MLPs like Legacy Reserves (NASDAQ: LGCY), QR Energy (NYSE: QRE), Atlas Resource Partners (NYSE: ARP), Eagle Rock ...

Oil and gas MLPs offer investors enormous cash distributions. Some of the smaller MLPs like Legacy Reserves (NASDAQ: LGCY), QR Energy (NYSE: QRE), Atlas Resource Partners (NYSE: ARP), Eagle Rock Energy Partners (NASDAQ: EROC), and Memorial Production Partners (NASDAQ: MEMP) offer yields of more than 10%. The problem is that not all of these enormous yields are equal as each company is pursing a slightly different strategy.

Atlas Resource Partners, for example is focused on buying up cheap natural-gas reserves in hopes of earning investors solid cash flow now and outsized future income as the value of those reserves increase. Meanwhile, both Legacy Reserves and QR Energy are focused on higher margin oil production. Finally, we have Eagle Rock Energy Partners and Memorial Production Partners, which have a more balanced production profile.

These, however, are just some of the differences between these high-yielding oil and gas companies. To take an even deeper look, I've created the slide show below to help investors decide which of these enormous distributions belong in their portfolios.

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  • Photo credit:http://www.flickr.com/photos/26557483@N08/5957330806/in/photolist-a5qSU7-aCx7Yz-bDQ9S8-dJZ524-c441K3-9NYrVg-cjcRKj-7Ecczy-8fTdBh-8fTeR7-eJL7Yj-8vdjNk-bqgSnt-bqgSTv-bqgSzn-9t5uoY-dhc1Rq-aEjxBS-bdD3NP-dhc5qC-aEjst5-ak2jnj-8fyenD-7GDLNv-iVPo6G-bdXfKT-bdXi1n-bdXjjV-bdXkJr-bdXhCX-bdXiEz-bdXiYc-bdXgKp-bdXg3e-bdXipe-bdXhp2-9GZVnn-bdXknv-bdXjLg-bdXk3t-e1cRDJ-9b86vA-gPYtge
  • Photo credit: http://www.flickr.com/photos/akasped/3837663953/in/photolist-6R82MT-7p1NJQ-8Qt9W3-8Eww7E-eyS46o-b3yY7r-hK4ht2-dJdmvr-hR1fXE-dNRfoq-dKiQ8A-9tutzp-8bSwEM-dy7Q6b-8Pepz6-a47QeL-bnaidD-8omnqG-8omnqL-8omnrd-8omnr3-dnRAMX/
  • Sources: http://files.shareholder.com/downloads/AMDA-HU2C0/2931700866x0x709049/8d3d2b4c-2162-46da-a1c6-339542975327/MEMP%20-%20RBC%20MLP%20Conf%20Investor%20Presentation%20-%20FINAL%2011%2022%2013.pdf
  • Sources: http://files.shareholder.com/downloads/LGCY/2935501301x0x717793/551df073-f73c-4e0f-803c-ecd3901c6458/Legacy%20Reserves%20January%20Investor%20Presentation%20vF.pdf
  • Photo credit: http://www.flickr.com/photos/rcbodden/5142987254/in/photolist-6R82MT-7p1NJQ-8Qt9W3-8Eww7E-eyS46o-b3yY7r-hK4ht2-dJdmvr-hR1fXE-dNRfoq-dKiQ8A-9tutzp-8bSwEM-dy7Q6b-8Pepz6-a47QeL-bnaidD-8omnqG-8omnqL-8omnrd-8omnr3-dnRAMX/
  • Sources: http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUwNzAwMTZ8Q2hpbGRJRD01Mjc3MDI=
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  • Sources: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTIwMjc4fENoaWxkSUQ9MjA0ODQzfFR5cGU9MQ==&t=1
  • http://www.flickr.com/photos/40775084@N05/6823166174/in/photolist-boWvA7-dVnWU3-dVnX4W-fykwqJ-du2TzF-euYAvp-8eh6Q9-8Ct1ds-bBRoLT-9dEpvB-972PT5-8edQtM-e5WpBf-8eh7ds-9Awwe5-7TEq4w-e9kejC-c226eY-aGgGpx-7TBdEZ-efWGAX-9JMDs5-cB3iY1-fSjjDi-9gdHeG-bBSkZe-bhiw3F-f4DrHG-8hJHx7-c226c3-8J584Q-8J58o5-8J227R-8J22Eg-8J58v7-8J22vB-dKvjeZ-dJiMBS-a47QeL-8FdUW9-bzVTkR-ek44Zd-boXkuq-edmo3M-apjDcM-7XtxMD-7Xtyi4-7XtxX8-7Xty8M-7XtysR-fSsjcH
  • Sources: http://files.shareholder.com/downloads/EROC/2935570689x0x718189/8988ca98-304e-4ae5-ab4d-0d4c22374957/1-13-14_UBS_Deer_Valley_Prez_FINAL_v5.pdf
  • Sources: http://files.shareholder.com/downloads/EROC/2935570689x0x718189/8988ca98-304e-4ae5-ab4d-0d4c22374957/1-13-14_UBS_Deer_Valley_Prez_FINAL_v5.pdf
  • http://www.flickr.com/photos/36989019@N08/6132949462/in/photolist-akWYcY-akWYqC-ctVqbj-c441uQ-9ixBrw-9ixBfh-9iuuzk-bqgSci-bqgS7k-bqgRr2-bqgRLH-eE6e8G-7Pffjp-ieXYKT-8s4LXw-8n1txi-9iuujX-9ixB7d-a37VcG-9rbSSh-bcDmat-akU9Tv-9rbSVN-9rbT15-d8NDVb-a6QfU5-ahSbNn-9N99Kd-9pKxoV-96AZf6-8WEeiJ-dTThph-a5qSU7-aCx7Yz-bDQ9S8-dJZ524-9NYrVg-7Ecczy-8fTdBh-8fTeR7-eJL7Yj-bqgSnt-bqgSTv-bqgSzn-bdD3NP-8fyenD-iVPo6G-bdXhCX-bdXgKp-bdXipe-9GZVnn
  • Sources: http://files.shareholder.com/downloads/AMDA-HU2C0/2931700866x0x709049/8d3d2b4c-2162-46da-a1c6-339542975327/MEMP%20-%20RBC%20MLP%20Conf%20Investor%20Presentation%20-%20FINAL%2011%2022%2013.pdf
  • Sources: http://files.shareholder.com/downloads/AMDA-HU2C0/2931700866x0x709049/8d3d2b4c-2162-46da-a1c6-339542975327/MEMP%20-%20RBC%20MLP%20Conf%20Investor%20Presentation%20-%20FINAL%2011%2022%2013.pdf
  • Sources: http://files.shareholder.com/downloads/AMDA-HU2C0/2931700866x0x709049/8d3d2b4c-2162-46da-a1c6-339542975327/MEMP%20-%20RBC%20MLP%20Conf%20Investor%20Presentation%20-%20FINAL%2011%2022%2013.pdf

Investor's Guide to Enormous Oil & Gas Dividends Investor's Guide to Enormous Oil & Gas Dividends Presentation Transcript

  • An Investor’s Guide to Oil & Gas MLPs (Part II) Photo credit: Flickr/haymarketrebel
  • Part II Will Look at Five Growing MLPs • Represent ~25% of segment’s value • Less geographic diversity • Higher yields
  • Legacy Reserves LP Ticker: LGCY • $1.5 billion market cap • 9.0% yield • Coverage ratio last quarter: 1.3x • Distribution paid quarterly Photo credit: Flickr/Edward Stojakovic
  • Asset Map Source: Legacy Investor Presentation
  • The Information that Matters • • • • • Total Proved Reserves: 88.4 million BOE Liquids production: 69% Reserve to production index: ~12 years General Partner: None Areas to watch: Permian Basin development
  • QR Energy LP Ticker: QRE • $1.2 billion • 11% yield • Distribution coverage ratio last quarter: 1.1x • Distribution paid monthly Photo credit: Flickr/Ray Bodden
  • Asset Map Source: QR Energy Investor Presentation
  • The Information that Matters • • • • • Total Proved Reserves: 99.1 million BOE Liquids production: 68% Reserve life index: ~16 years General Partner: None Areas to watch: Permian Basin development and balance sheet
  • Atlas Resource Partners, L.P. Ticker: ARP • $1.3 billion market cap • 10.3% yield • Distribution coverage ratio last quarter: 1.1x • Distributions paid monthly Photo credit: Flickr/Nicholas A. Tonelli
  • Asset Map Source: Atlas Resource Investor Presentation
  • The Information that Matters • • • • • Total Proved Reserves: 1.4 Tcfe Liquids production: 10% Reserve life index: ~13 years General Partner: Atlas Energy Areas to watch: Direct investment program, natural gas prices and shale focused drilling
  • Eagle Rock Energy Partners, L.P. Ticker: EROC • $880.9 million market cap • 10.9% yield • Distribution coverage ratio last quarter: 1.05x • Distribution paid quarterly Photo credit: Flickr/Kool Cats Photography
  • Asset Map Source: Eagle Rock Investor Presentation
  • The Information that Matters • • • • • Total Proved Reserves: 350 Billion Cfe Liquids production: 44% Reserve life index: ~13 years General Partner: None Areas to watch: Divestment of midstream operations and SCOOP growth
  • Memorial Production Partners LP Ticker: MEMP Photo credit: Flickr/Loco Steve • $1.34 billion market cap • 10% yield • Distribution coverage ratio last quarter: 0.67x • Distribution paid quarterly
  • Asset Map Source: Memorial Investor Presentation
  • The Information that Matters • • • • Total Proved Reserves: 1,063 Billion Cfe Liquids production: 31% Reserve life index: ~18 years General Partner: Memorial Resource Development and Natural Gas Partners • Areas to watch: Acquisitions outside of Texas and distribution coverage ratio
  • Now Let’s See How Each Compares • • • • Scale Reserves Production Hedging
  • Enterprise Value
  • Total Proved Reserves Sources: Company presentations, SEC filings and author’s calculations
  • Where is the Cash Flowing From? Sources: Company presentations, SEC filings and author’s calculations
  • How Secure is the Cash Flow? Sources: Company presentations, SEC filings and author’s calculations
  • How Secure is the Cash Flow? Sources: Company presentations, SEC filings and author’s calculations
  • Key Takeaways • Legacy Reserves – Solid balance sheet, oil rich production though not as well hedged • QR Energy – Oil rich production with downside risk to falling oil prices • Atlas Energy – Natural gas rich cash flows locked in for near term, with long-term upside • Eagle Rock Energy – Balanced production and solid hedges and lots of upside to the SCOOP • Memorial – Balanced production with locked in cash flows
  • Our Special Free Report on nine rock-solid dividend stocks