Why Stifel Is Downgrading Vanguard Natural Resources

• Vanguard Natural Resources, LLC VNR shares have gained 7 percent since August 19 and 8 percent since September 14.
• Stifel’s Brian Brungardt downgraded the rating for the company from Buy to Hold.
• Following the recent jump in the unit price, Brungardt believes that they are now fairly valued.

Analyst Brian Brungardt said that the downgrade is based on valuation, since the units were trading at a price close to the prior price target of $10. He explained, “While we continue to view the partnership as one of the higher quality partnerships, we believe the units are fairly valued.”

Vanguard Natural Resources’ units had continued their outperformance and “are approaching fair value under the Stifel commodity forecast,” Brungardt wrote. The units are trading at a multiple that is higher than the historical range since January 2013.

“We note units of VNR have outperformed peers trailing 1 month, trailing 3 month, and year-to-date periods as units have returned +5.2 (peer average -7.8%), -39.8% (peer average -51.3%), and -40.1% (peer average -55.4%) respectively,” the Stifel report stated.

Brungardt expects the partnership to continue to focus on the integration of the planned Eagle Rock Energy Partners and LRR Energy acquisitions, for the rest of FY15. “We would be more constructive on units should the commodity price outlook improve or the partnership announces additional accretive acquisitions.”

Brungardt added that Vanguard Natural Resources had been removed from Stifel’s Select List.