Deutsche Bank Initiates Pioneer Southwest Energy Partners (PSE) with a Buy

June 18, 2008 8:12 AM EDT

Deutsche Bank initiates coverage on Pioneer Southwest Energy Partners (NYSE: PSE) with a Buy rating and a $26 price target.

The firm believes PSE offers an ideal asset portfolio for an upstream mater limited partnership (MLP), and said, "Despite "rough waters" for E&P MLPs over the past year, we believe that they can be a viable, and in fact attractive, growth investment when the entity itself is well-managed, focused, properly structured and well-capitalized, in the right type of assets, and amply hedged. In our estimation, Pioneer Southwest offers these favorable investment characteristics. A current yield of 9% plus distribution growth estimated at 5-6%/annum yields projected total return potential of 14-15% per year."

The firm also highlights that PSE was formed with no debt at the time of its IPO, and had at its disposal a $300MM unsecured revolving credit facility with $200MM initially available. The firm believes PSE will capture added opportunities through "drop downs", acquisitions form its parent, Pioneer Natural Resources (NYSE: PXD). In addition, PSE’s management team combines for an average of more than 25 years in the oil and gas industry.

Pioneer Southwest Energy Partners L.P. engages in the ownership and acquisition of oil and gas properties.

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