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Stats For E&P MLPs 4-25-14

One of the half-truths (or hyperbole's) of investing that I strongly believe in - "There are no bad stocks, there are only bad portfolios." MLP E&P stocks are relatively low growth and relatively high risk investments. This conservative (or risk sensitive) investor would say that a MLP portfolio that derives more than a third of its income from E&P MLPs is a bad portfolio.

I own units in ARP. I purchased ARP when I sold shares in BDC TCAP. I needed to replace the income. To borrow an explanation from my unwritten book ("Everything you need to know about investing you can learn from the lyrics in Rock n' Roll") - it was a decision where I used the lyrics of Glen Campbell's Wichita Lineman - it was a case where "I need you more than want you". It was also the case that ARP had the most attractive yield + distribution CAGR. That decision was made in July of 2013.

Arp has had very good distribution growth since my purchase. ARP still has a below average distribution/DCF ratio - which implies better than average distribution growth. The projected 2015 DCF/distribution ratio is even more attractive. So I still feel good about the decision. The fact that ARP is a relatively small holding in my total MLP portfolio assists with being comfortable in that decision.

The data:

MLP E&P Stocks
On 4-23 EROC suspended all distributions until midstream assets are sold. The yield is based on the Q1 distribution.

  12-31-13 Current Distrib/ Q1 Dist Dist/dcf Dist/dcf Year-to-Date Percent Change
  Price Price Quarter Yield 2014 2015 Price Pr+Dist EPS Target DCF Dist* cagr

ARP 20.48 20.27 0.5800 11.45 85.93 78.38 -1.03 1.81 -89.80 1.34 -0.37 20.83 0.00
BBEP 20.34 20.34 0.4925 9.69 87.95 81.40 0.00 2.42 -14.02 0.96 -0.44 4.79 -20.00
EROC 5.95 4.38 0.1500 13.70 98.36 95.24 -26.39 -23.87 -60.00 -20.92 -11.59 -31.82 0.00
EVEP 33.93 36.52 0.7710 8.44 96.98 83.35 7.63 9.91 15.15 -5.62 -5.64 0.52 -37.50
LINE 30.79 28.56 0.7248 10.15 84.03 79.65 -7.24 -4.89 9.03 -0.33 -8.97 -0.03 -50.00
LGCY 28.16 25.96 0.5900 9.09 85.20 86.76 -7.81 -5.72 -6.35 -4.29 -2.12 3.51 11.11
LRE 17.03 17.73 0.4900 11.05 89.91 86.34 4.11 6.99 -19.83 3.55 -10.29 2.08 -20.00
MCEP 22.85 22.94 0.5150 8.98 72.28 74.10 0.39 2.65 -13.94 -1.22 -14.41 4.04 -14.29
MEMP 21.94 22.96 0.5500 9.58 83.02 86.27 4.65 7.16 -4.61 4.22 -8.93 8.37 -25.00
QRE 17.12 18.30 0.4875 10.66 90.70 95.59 6.89 9.74 6.15 -0.90 1.90 0.00 0.00
VNR 29.52 30.67 0.6225 8.12 78.30 78.06 3.90 6.00 10.69 3.74 -0.93 2.47 -5.41

The E&P Average   10.08 86.60 84.10 -1.35 1.11 -15.23 -1.77 -5.62 1.34  

Click to enlarge

* Distribution growth is year over year - or Q1-14 dividend by Q1-13 Distribution dates used were:

ARP : monthly BBEP : monthly EROC : 02-14 EVEP : 02-14 LINE: monthly LGCY: 02-14
LRE : 02-14 MCEP: 02-12 MEMP: 02-14 QRE: monthly VNR: monthly
Click to enlarge

Historical MLP E&P Month-End Yields:

Jan 09: 15.90% Feb: 18.45% Mar: 19.60% April: 15.48% May: 15.24% June: 10.58%
July 09: 9.39% Aug: 7.75% Sept: 7.10% Oct : 7.49% Nov: 7.32% Dec: 6.47%
Jan 10: 6.43% Feb: 6.30% Mar: 7.04% April: 6.68% May: 8.90% June: 8.53%
July 10: 7.62% Aug: 7.90% Sept: 7.48% Oct : 7.10% Nov: 7.06% Dec: 6.59%
Jan 11: 6.31% Feb: 6.17% Mar: 6.01% April: 5.78% May: 6.27% June: 6.37%
July 11: 6.37% Aug: 6.68% Sept: 7.17% Oct : 6.50% Nov: 6.80% Dec: 6.42%
Jan 12: 6.42% Feb: 7.41% Mar: 7.41% April: 7.50% May: 8.82% June: 8.70%
July 12: 8.18% Aug: 7.94% Sept: 7.70% Oct : 7.59% Nov: 8.24% Dec: 8.73%
Jan 13: Feb: Mar: April: May: June: 8.64%
July 13: 8.68% Aug: 10.19%* Sept: 9.80% Oct : 9.89% Nov: 10.12% Dec: 9.79%
Jan 14: 9.76% Feb: 9.93% Mar: 10.05% April: May: June: 8.64%
Click to enlarge

* 1st month where EROC replaced CEP. Oct was 1st month PSE was dropped.
Sector average yield stats are not that useful due to several E&Ps [like ATN, BBEP, CEP and QELP] eliminating distributions in 2008 and 2009, and with BBEP re-starting distributions in 2010. In February of 2012, LRE, MCEP, MEMP and QRE were added to the sector, dropping the influence of zero distribution paying CEP had on the sector average. Due to those distortions, the month end yield history on LINE is also included below as a representative of sector yields for each time period.


Historical LINE Month-End Yields:

Jan 09: 15.47% Feb: 16.79% Mar: 16.91% April: 15.24% May: 12.76% June: 12.88%
July 09: 11.26% Aug: 11.84% Sept: 11.00% Oct : 10.29% Nov: 10.60% Dec: 9.04%
Jan 10: 9.68% Feb: 9.56% Mar: 9.80% April: 9.30% May: 10.30% June: 9.49%
July 10: 8.21% Aug: 8.84% Sept: 7.88% Oct : 7.75% Nov: 7.27% Dec: 7.04%
Jan 11: 6.67% Feb: 6.80% Mar: 6.78% April: 6.54% May: 6.79% June: 6.76%
July 11: 6.89% Aug: 7.29% Sept: 7.74% Oct : 7.13% Nov: 7.58% Dec: 7.28%
Jan 12: 7.25% Feb: 7.23% Mar: 7.23% April: 6.86% May: 8.16% June: 7.61%
July 12: 7.32% Aug: 7.29% Sept: 7.03% Oct : 6.89% Nov: 7.32% Dec: 8.23%
Jan 13: Feb: Mar: April: May: June: 8.74%
July 13: 10.72% Aug: 12.02% Sept: 11.60% Oct : 10.47% Nov: 9.53% Dec: 9.42%
Jan 14: 8.84% Feb: 9.10% Mar: 9.91% April: May: June: 8.74%
Click to enlarge

E&P DCF and Price/DCF Stats 04-25


  DCF / Unit [in cents] DCF Growth P/DCF Ratios
Co. 2009 2010 2011 2012 2013 2014 2015 12-13 13-14 14-15 2013 2014 2015

ARP 0 0 0 193 236 270 296 22.28% 14.41% 9.63% 8.59 7.51 6.85
BBEP 230 238 222 210 202 224 242 -3.81% 10.89% 8.04% 10.07 9.08 8.40
EROC 162 105 100 100 71 61 63 -29.00% -14.08% 3.28% 6.17 7.18 6.95
EVEP 340 297 363 355 240 318 370 -32.39% 32.50% 16.35% 15.22 11.48 9.87
LINE 300 320 350 325 295 345 364 -9.23% 16.95% 5.51% 9.68 8.28 7.85
LGCY 245 232 272 260 271 277 272 4.23% 2.21% -1.81% 9.58 9.37 9.54
LRE 0 0 0 200 191 218 227 -4.50% 14.14% 4.13% 9.28 8.13 7.81
MCEP 0 0 0 230 250 285 278 8.70% 14.00% -2.46% 9.18 8.05 8.25
MEMP 0 0 0 235 241 265 255 2.55% 9.96% -3.77% 9.53 8.66 9.00
QRE 0 0 187 225 200 215 204 -11.11% 7.50% -5.12% 9.15 8.51 8.97
VNR 274 268 331 310 255 318 319 -17.74% 24.71% 0.31% 12.03 9.64 9.61

Average             -6.37 12.11 3.10 9.86 8.72 8.47
Click to enlarge

Yield + CAGR Total Return Expectations


Company Q1-14 Consensus Total Bonds My Tot Rtn Consensus Pr Impl
    Yield CAGR Return Ratings RRRs - RRR Ratings CAGR

Atlas ARP 11.45% 4.00% 15.45% NR 13.50 1.95 2.4 2.05
BreitBurn BBEP 9.69% 2.00% 11.69% B 12.70 -1.01 1.6 3.01
EagleRock EROC 13.70% 0.10% 13.80% B 12.70 1.10 2.5 -1.00
EV Energy EVEP 8.44% 2.50% 10.94% B- 13.00 -2.06 2.1 4.56
Linn Energy LINE 10.15% 2.00% 12.15% B 13.00 -0.85 2.4 2.85
Legacy LGCY 9.09% 3.00% 12.09% B- 12.70 -0.61 2.0 3.61
LRR Energy LRE 11.05% 2.00% 13.05% NR 13.50 -0.45 2.3 2.45
Mid-Con MCEP 8.98% 3.00% 11.98% NR 13.50 -1.52 1.8 4.52
Memorial MEMP 9.58% 3.00% 12.58% B- 13.00 -0.42 1.7 3.42
QR Energy QRE 10.66% 1.00% 11.66% B- 13.00 -1.34 2.1 2.34
Vanguard VNR 8.12% 3.50% 11.62% B 12.70 -1.08 1.9 4.58

Average   10.08% 2.37% 12.46%       2.07

Click to enlarge

Disclosure: I am long ARP.