On Jan 3, 2014, we have reiterated our Neutral recommendation
PVR Partners, L.P.
). The partnership currently has a Zacks Rank #3 (Hold).
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Why the Reiteration?
In the previous quarter, PVR Partners' pro froma earnings per
unit missed the Zacks Consensus Estimate and the year-ago figure.
This was primarily due to a rise in interest expenses and total
expenses, and higher units outstanding.
The partnership's over-dependence on a limited group of customers
for its natural gas midstream and coal royalty revenues is a
threat for its upcoming performance. If any of these customers
become bankrupt or fail to keep their obligations, PVR Partners'
financial results will be negatively impacted.
On the positive side, we appreciate the partnership's steady
effort towards expansion of its operations besides getting
long-term service commitments from the petroleum companies.
Currently, PVR Partners is expanding its footprint in Marcellus
and Utica Shale, Cline and Mississippian Lime. The partnership
plans to invest $125-$150 million through 2015 to construct a
45-mile natural gas trunkline and allied gathering pipelines in
the Utica Shale. The installation of new pipelines while
upgrading the existing infrastructure will enhance the
partnership's presence in the region and serve more customers.
Apart from investment in growth projects, the partnership also
won service contracts from several upstream players. PVR Partners
already entered into service agreements with
) and the associates of Carrizo Oil & Gas and Reliance Group.
We believe signing contracts with the oil and gas companies will
ensure stable revenue stream for the partnership.
Other Stocks to Consider
Some better-ranked stocks in the same sector include
Atlas Energy, L.P
Western Gas Partners LP
). All these stocks hold a Zacks Rank #2 (Buy).