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Oil Wasn’t the Only Catalyst Fueling Energy Stocks This Week

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Oil helped, but there were a lot of news-driven catalysts fueling the big moves of National Oilwell Varco, American Midstream Partners, Seadrill Partners, Legacy Reserves, and Memorial Production Partners.

Published in: Economy & Finance
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Oil Wasn’t the Only Catalyst Fueling Energy Stocks This Week

  1. 1. Oil Wasn’t the Only Catalyst Fueling Energy Stocks This Week f Image Source: National Oilwell Varco.
  2. 2. Crude continued its rebound this week, jumping past $45 a barrel, touching a 2016 high. That certainly provided some fuel to get this week's energy stock rally started. However, crude wasn't the only catalyst this week, with a number of the biggest energy movers fueled by news-driven catalysts.
  3. 3. What: Seadrill Partners (NYSE: SDLP) jumped more than 18% this week.
  4. 4. So What:  Key driver: Cash distribution and credit amendment  Seadrill Partners announced its first quarter cash distribution of $0.25 per unit  That’s in line with last quarter, but down 55% over last year’s rate after the company reduced its payout at the end of 2015 to preserve capital  The company also announced an amendment to certain of its credit facilities
  5. 5. Now What:  The company has consented to an agreement between its parent, Seadrill, and its banking group to amend covenants relating to secured credit facilities where both parties are guarantors  Key takeaway: With no changes to the payout and more breathing room on its credit facilities, Seadrill Partners investors are breathing a bit easier
  6. 6. What: National Oilwell Varco (NYSE: NOV) rallied 21% this week.
  7. 7. So What:  Key driver: Earnings and an analyst upgrade  Morgan Stanley upgraded the company from underweight to overweight and set a $45 price target right before the company released its first-quarter results
  8. 8. Now What:  That timing proved to be impeccable after the company turned in a lower loss than expected, beating the consensus estimate by $0.03 per share  Key takeaway: Investors liked the upgrade and the fact that earnings weren’t as weak as feared
  9. 9. What: Memorial Production Partners (NASDAQ: MEMP) surged 22% this week.
  10. 10. So What:  Key driver: The acquisition of its general partner and the reduction of its distribution  Memorial Production Partners announced this week that it has agreed to acquire its general partner and 50% of the incentive distribution rights from Memorial Resource Development as well as the other 50% of the IDRs from a third party for $0.75 million
  11. 11. Now What:  The transaction will simplify the company’s corporate structure with minimal impact to its liquidity  The company also announced it will reduce its distribution 70% to $0.03 per share in order to preserve liquidity  Key takeaway: Investors like the moves to preserve liquidity and simplify its corporate structure
  12. 12. What: American Midstream Partners (NYSE: AMID) rallied 32.7% this week.
  13. 13. So What:  Key driver: A distribution reduction and acquisitions  American Midstream also announced a distribution reduction, reducing its payout by 13% to provide additional liquidity
  14. 14. Now What:  The company also announced it was acquiring $225 million in assets in the Gulf of Mexico, including the Destin natural gas pipeline and an additional interest in Delta House  These moves will boost the company’s earnings and push its distribution coverage ratio up to 1.5  Key takeaway: Investors love the moves to bolster the company’s asset base and balance sheet
  15. 15. What: Legacy Reserves (NASDAQ: LGCY) jumped 41.9% this week.
  16. 16. So What:  Key driver: Investors sense something is up  Legacy Reserves surged this week on no news  Higher oil prices likely played a partial role in this move  However, the upstream MLP also benefited from news- driven catalysts at other MLPs, including Memorial Midstream Partners
  17. 17. Now What:  Investors seems to be banking on Legacy making a strategic announcement soon to bolster its balance sheet  That said, it appears investors will have to wait until the company reports first-quarter results on May 4 to find out what it is planning to do  Key takeaway: Investors are hopeful this upstream MLP will have some good news next week
  18. 18. This could be the next billion- dollar iSecret

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