On May 16, 2013, we upgraded our recommendation on
PVR Partners L.P.
) to Neutral from Underperform. The partnership currently has a
Zacks Rank #3 (Hold).
Why the Upgrade?
There are several growth factors, including PVR Partners'
favorable performance in first-quarter 2013, steady projects
pipeline, and operational efficiency, which led to the
improvement of the stock.
In first-quarter 2013, PVR Partners' both top as well as bottom
line surpassed the Zacks Consensus Estimates on strong
contribution from the natural gas business, and improvement in
collection of trunkline and gathering fees.
During first-quarter, PVR Partners invested $90.1 million
primarily to expand coverage in Marcellus Shale, Panhandle and
Crescent systems. Further, setting up of new pipelines, and
extension and improvement of the existing ones will enable the
partnership to strengthen its presence in the region and serve
PVR Partners recently acquired the membership interests of Chief
Gathering. This transaction will allow the partnership to capture
significant opportunities from the productive counties in the
northeastern area of the Marcellus Shale. We believe this
transaction will subsequently help PVR Partners to become a
leader in the midstream business with significant assets in both
the Marcellus Shale and the Granite Wash.
PVR Partners is gradually converting itself from a coal royalty
business to the midstream natural gas business. We consider this
initiative as a positive move for the partnership's forthcoming
performance. This step will help PVR Partners to diversify its
portfolio along with steady profitability.
However, we are apprehensive about PVR Partners' over-reliance on
a limited group of customers and greater dependence on third
party service-providers for receiving and supplying natural gas
and natural gas liquids to its customers.
Other Stocks to Consider
Apart from PVR Partners, other companies from the industry such
Atlas Energy, L.P
EQT Midstream Partners, LP
Pembina Pipeline Corporation
) are currently performing well and carry a Zacks Rank #1 (Strong
Radnor, PA-based PVR Partners owns and operates a string of
natural gas midstream pipeline systems and processing plants and
is also involved in the management of coal as well as natural gas
ATLAS ENERGY LP (ATLS): Free Stock Analysis
EQT MIDSTRM PTR (EQM): Free Stock Analysis
PEMBINA PIPELN (PBA): Free Stock Analysis
PVR PARTNERS LP (PVR): Free Stock Analysis
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