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Why Exterran Partners Keeps Increasing Its Distributions

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EXLP increases distribution

Exterran Partners, L.P. (EXLP) has continuously increased its quarterly distributions. This is due to EXLP’s growth, primarily through acquisitions from its parent company, Exterran Holdings (EXH), as well as through third-party acquisitions and organic growth.

EXLP is a subsidiary company of Exterran Holdings (EXH), which makes up ~0.11% of the Vanguard Energy ETF (VDE).

Exterran had a strong distribution cash flow (or DCF) coverage of 1.41x in 4Q14. EXLP’s current distribution payout is $0.5575, which represents a yield of ~9%.

Other companies that offer natural gas compression services and other services include Access Midstream Partners that merged into Williams Partners (WPZ) and Regency Energy Partners (RGP), which is to merge into Energy Transfer Partners (ETP).

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Why has Exterran Partners been able to increase distribution?

EXLP has good future prospects as a result of its significant acquisitions in 2014 and the dropdowns it’s likely to acquire from Exterran Holdings (EXH). In 4Q14, EXLP registered big gains in its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), which grew by approximately 36.4% year-over-year, and DCF that grew by ~41% in 4Q14. This is a result of the acquisitions and organic growth the company achieved in 2014.

Exterran also noted that long-term oil and gas infrastructure build-outs in shale regions will present greater opportunities for growth. Projections for natural gas production trends in 2015 look bullish, which is a positive for natural gas compression service providers such as EXLP.

In the following part, we’ll take a look at EXLP’s operational highlights.

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