On Sep 19, 2013, 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 second quarter of 2013, PVR Partners reported earnings of
5 cents per unit, missing the Zacks Consensus Estimate by 8 cents
due to a rise in interest expenses and higher units outstanding.
The partnership's quarterly revenues were $273.5 million, beating
the Zacks Consensus Estimate by $11.5 million. A year-over-year
increase of 22.7% in revenues was primarily driven by strong
contribution from the natural gas business, and higher collection
of trunkline and gathering fees.
We appreciate PVR Partners' effort towards expanding its
operations through organic and inorganic route, along with
getting long-term service commitments from the petroleum
companies. Recently, the partnership has entered into an
) to provide trunkline and gathering as well as compression
services. PVR Partners is continuously investing sizeable amounts
to strengthen its presence in the region, which will help to get
more contracts from the oil and gas companies, going forward.
However, PVR Partners' over-dependence on a limited group of
customers for its natural gas midstream and coal royalty revenues
is a threat for its future performance. If any of these customers
become insolvent or fail to keep their commitments, the
partnership's financial results will be affected.
PVR Partners is also witnessing challenges from third-party
service providers in terms of receiving and supplying gas and
natural gas liquids. We note that the capacities of the
interconnecting pipelines sometimes get affected due to pipeline
testing and repairing, and reduction in operating pressure, thus
restricting future revenues.
Other Stocks to Consider
The other stocks in the industry that are worth considering
Oiltanking Partners L.P.
) with a Zacks Rank #1 (Strong Buy), and
) with a Zacks Rank #2 (Buy).