Legacy Reserves Is the Most Leveraged among Peers
Legacy Reserves (LGCY) has $1.2 billion of outstanding debt on its balance sheet, which resulted in a debt-to-adjusted-EBITDA ratio of 6.4x at the end of the first quarter of 2016.
MLPs are going through a liquidity crisis due to a decline in earnings driven by a fall in commodity prices.
Memorial Production Partners (MEMP) has hedged a significant 89% of 2016 production.
NYMEX near-month Henry Hub natural gas futures contracts are currently trading below $2.0 per MMBtu on concerns over rising natural gas inventories and the decline in natural gas demand.
Legacy Reserves has the most “sell” ratings among the selected peer group. 37.5% of analysts rate LGCY a “sell” and the remaining 62.5% rate it a “hold.”
In this series, we’ll analyze the current liquidity and leverage positions for Vanguard Natural Resources (VNR), EV Energy Partners (EVEP), Memorial Production Partners (MEMP), and Legacy Reserves (LGCY).
Generally, MLP yield moves in the same direction as Treasury yields in the long term. MLP yields trade at a spread over Treasuries.
The higher increase in WTI versus Brent resulted in a narrowing of the WTI-Brent spread. Brent oil first-line futures prices rose 1.9% to $48.70 per barrel in the week ended May 20.
According to data released on May 19, 2016, US crude oil production fell 0.1% in the week ended May 13, 2016. A decline in crude oil production negatively impacted crude oil heavy midstream MLPs.
Mont Belvieu ethane prices fell marginally by 0.7% to $0.193 per gallon in the week ended May 20, 2016. Prices rose 2.6% to $0.194 per gallon in the previous week.
The Henry Hub–Mont Belvieu fractionation spread rose to $14.30 per barrel in the week ended May 20, 2016. It was $13.40 per barrel in the previous week.
The series covers movements in key indicators that impact MLP performance to help you make informed decisions about your investments.
One of the primary reasons for Ferrellgas Partners’ (FGP) high leverage level is its high capital expenditure.
Ferrellgas Partners (FGP) has a “hold” rating from 67% of the analysts and a “sell” rating from the remaining 33%. None surveyed rated FGP a “buy.”
The EV-to-EBITDA multiple is an important metric for valuing MLPs. The valuation ratio for Suburban Propane Partners (SPH) is 13.5x.
Suburban Propane currently trades at a distribution yield of 11.1%. This compares to 8.6%, 10.5%, and 4.5% for APU, FGP, and SGU, respectively.
During its more than 75-year history, Ferrellgas has completed more than 235 acquisitions. Now it’s one of the largest propane retailers in the US.
AmeriGas Partners (APU) and Star Gas Partners (SGU) reported a 14% and 31% YoY drop, respectively, in their EBITDAs in the quarter ended March 31, 2016.
Above-normal temperatures in the United States in the 2015–2016 winter season lowered heating demand. This resulted in a 16% lower propane demand.
Suburban Propane Partners’ YTD returns have exceeded those of peers APU, FGP, and SGU. The Alerian MLP Index (AMZ) has generated total returns of 6% YTD.