Wells Fargo Upgrades Eagle Rock Energy Partners, L.P. (EROC) to Market Perform; Revised Proposal From NGP Slightly More Positive

October 14, 2009 8:17 AM EDT

Wells Fargo upgrades Eagle Rock Energy Partners, L.P. (Nasdaq: EROC) from Underperform to Market Perform. Valuation range increased to $4.00-7.00 from $1.00-3.00.

Wells analyst says, "Revised proposal from Natural Gas Partners (NYSE: NGP) is slightly more positive for current unitholders and is step toward possible approval. In our opinion, this proposal gives EROC a reasonable opportunity to survive a weak natural gas price environment and adds visibility to possible distribution growth...Our 2010 and 2011 DCF per unit estimates (excluding subordinated units) are now $0.83 and $1.02 compared to $1.15 and $1.70, previously. This reduction is based on a 50% increase in estimated common units outstanding. We estimate the EROC could pay a distribution of $0.25 per unit in 2010 and $0.60 in 2011, up from our previous estimate of $0.10."

"The main differences between the revised and original proposals are as follows: (1) NGP will purchase EROC’s minerals business for $145 million as opposed to $135 million previously if, after a 100 day “go-shop” period, the partnership can’t find a better offer from a third party; (2) EROC will pay NGP a transaction fee of $32.5 million in either cash or common units and no advisory fee as opposed to the original proposal of $31.5 million in cash and a $5 million advisory fee; and (3) EROC's option to purchase the remaining 51% of the GP and all of the incentive distribution rights (IDR) is exercisable until December 31, 2012 as opposed to one year following the approval date, previously. NGP and the conflicts committee stated that this revised proposal "constitutes an acceptable framework for negotiations of definitive documents". Once this proposal becomes a definitive agreement, it still must be approved by a majority of non-affiliated common unitholders."

To see more analyst ratings on EROC Click Here.

Related Categories

Upgrades

Stocks Mentioned

Comments

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?