UPDATE: Bank of America Downgrades Eagle Rock Energy Partners LP as Cash Distribution is Less Sustainable

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In a report published Tuesday, Bank of America analyst Gabe Moreen downgraded the rating on
Eagle Rock Energy Partners LPEROC
from Buy to Neutral, and lowered the price target from $9.50 to $7.00. In the report, Bank of America noted, “After market close on 28 Oct., EROC announced preliminary 3Q13 adjusted EBITDA of $63mn (a 12% increase QoQ), largely in-line with the prior BofAML estimate of $65mn. Distributable cash flow (DCF) of $25mn was below the prior BofAML estimate of $29mn largely due to increased maintenance capex in the upstream segment. Despite sequential improvement in 3Q13, EROC cut its 3Q13 cash distribution to $0.15 per LP unit ($0.60 annualized), representing a 32% decrease from the 2Q13 run-rate of $0.22 per LP unit. The newly declared distribution reflects cash distribution coverage of 1.05x. The distribution cut contrasts with our expectation that it was more likely than not that EROC would be able to sustain its current cash distribution on better midstream volumes, NGL pricing and absence of one-timers that impacted 1H13 results.” Eagle Rock Energy Partners LP closed on Monday at $7.35.
Posted In: Analyst ColorDowngradesAnalyst RatingsBank of AmericaGabe Moreen
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