Atlas Pipeline: Hang in There

Mar. 5.09 | About: Atlas Pipeline (APL)

I just went through the quarterly conference call for Atlas Pipeline Partners (NYSE:APL) and the news is encouraging. First, I will state that the current market mentality does not reward companies that are able to continue to prosper or are working to improve their results in the current economic environment. I am really at a loss to understand why there is not more positive stock price results for those companies that are still doing OK despite the overall economic situation.

I pulled two major ideas from the APL conference call that I believe are positive for the company:

  1. The 38¢ dividend declared for the 4th quarter had 1.5 times coverage in distributable cash flow. Prices and margins have improved in the first quarter and management declared that the new dividend was set at a (hopefully) sustainable rate. The stock currently yields 26%.
  2. The company is in end-stage negotiations to sell part or all of 3 different assets. The proceeds from these sales will be used to pay down debt and de-leverage the company. Completion of these deals could happen in just a few weeks.

APL has been one of the hardest hit of the midstream natural gas companies down over 90% from last summer's 52 week high. Atlas Pipeline Partners seems to have survived the 4th quarter energy price collapse and is still able to generate free cash flow. It may take another quarter or two of increasingly better numbers for the market to like this stock again, but at the current share price I think long term investors will be well rewarded.

Disclosure: APL is a component of my site’s Income Portfolio.