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Summary

  • Distribution will be paid on July 15 of $0.1933 per unit, buy after July 3.
  • 47 Mmboe deal previously announced is completed for long term production goal.
  • ARP has an interest in over 12,000 producing wells.
  • Oil Price increases are good for cash flow and bottom line distributions.

On June 30, 2014, Atlas Resource Partners, L.P. (ARP) announced the completion of its previously announced acquisition of approximately 47 million barrels of oil equivalent ("Mmboe") reserves, including proved developed producing reserves of approximately 25 Mmboe, for $420 million. The acquired position is located in the Rangely field in northwest Colorado, a mature CO2 flood with low-decline oil production. The transaction has an effective date of April 1, 2014.

The acquired assets are expected to provide ARP with a stable, high margin cash flow stream with a low-decline profile (average 3-4% annual decline rate over the past 15 years). The asset position is a tertiary oil recovery project using CO2 flood activity, and the production mix is predominantly oil at 90%, with the remainder coming from NGLs. ARP will have an approximate 25% non-operating net working interest in the assets, and Chevron Corporation will continue as operator. Material capital expenditures and growth projects are subject to ARP's approval.

Atlas Resource Partners, L.P. is an exploration & production master limited partnership active in oil and gas production in the Barnett Shale (TX), the Appalachian Basin, the Raton Basin (NM), the Black Warrior Basin (AL) and the Mississippi Lime (OK). ARP owns an interest in over 12,000 producing natural gas and oil wells, representing ~1.4 Tcfe of net proved reserves. Additionally, Atlas Resource Partners, L.P. is a leading sponsor for tax-advantaged direct natural gas and oil investment partnerships in the United States. The company uses both methods of drilling, both multi-stage vertical drilling and horizontal, and in business for over 40 years through several Atlas entities.

ARP has 65.8 million shares outstanding with a market cap at $1.33 billion. With a unit price at $20.51 (as of open on July 2, 2014), the current monthly distribution will be paid on July 15, of $0.1933 per unit with an ex-dividend date of July 2, 2014. This puts the current yield at 15% annualized.

ARP is one of our favorite exploration and production MLPs. With the large number of production wells and the favorable price due to the instability of the world production, ARP is earning a strong income on sales. We expect ARP to continue growing with new purchases and extending the life of current wells with new technologies into the future. With the amount of reserves, technologies will aid the increased recovery of oil crude and gas over time.

ARP will continue to pay a double-digit distribution to its investors. We recommend a strong paying distribution that pays monthly and has ranged from the $19s to $21 over the last several months. Expect the price to drop below $20 after the ex-dividend date beginning July 3, and a buy-in below $20 is a great entry point. We recommend a buy-and-hold for a nice monthly paycheck, or reinvest to grow your portfolio at a faster rate.

Disclosure: The author is long ARP. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Atlas Resource Partners Going Ex-Dividend On July 2, 2014