Protected Principal Retirement Strategy: Hunton For A Bargain

| About: New Source (NSLPQ)
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I have mentioned New Source Energy Partners (NSLP) in a prior article written this past May (here). At that time I added a small position to the Protected Principal Retirement Strategy portfolio. Having done additional research into NSLP, I have decided to add to this position. The balance of this article explains the rationale for my additional purchase.

What It Does

New Source Energy Partners is an upstream Master Limited Partnership [MLP] that produces primarily liquids rich oil and natural gas products solely from the Hunton formation in East Central Oklahoma. More specifically it owns 91,000 acres and has 216 producing wells in the Golden Lane Field.

What I Like

In its recent conference call, NSLP announced that it anticipated daily production increases in the second quarter of 2013 that would fall in the range of 3900 - 4100 BOE/Day. This is an increase from production levels in the 3700 BOE/Day range in quarter one, and represents about a 20 percent increase in guidance.

NSLP has approximately 79 percent of production hedged through the end of 2014.

Key Metrics

Analysts have recently issued upgrades on NSLP, with target prices in the $24 - $25 range. With the current price just over $20, this would represent a price appreciation of about 25 percent.

In April it paid a partial quarterly distribution of $.274. During the conference call, management announced that the second quarter distribution would be $.55 and would increase to $.57 in the third quarter of 2013.

A full year distribution of $2.28, coupled with a target price of $25 would equate to a total return of just under 34 percent.


I am looking to add to NSLP, particularly if I can buy it at $20 or lower. With the markets tanking in recent days, NSLP's price has held up relatively well. I remain hopeful that at some point my target purchase price will be reached.

Disclosure: I am long NSLP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article does not constitute either a buy or sell recommendation for any stocks mentioned.