Upstream energy partnership
QR Energy L.P.
) has agreed to acquire certain oil properties in the Arkansas,
Louisiana and Texas (Ark-La-Tex) area from an undisclosed private
seller for $110 million in cash.
As of June 1, the assets - adjacent to QR Energy's existing
holdings in the region - hold an estimated 6 million
oil-equivalent barrels (MMBOE) in proved reserves (92% oil, 99%
proved developed) and will add 900 BOE (92% oil) to the onshore
outfit's daily production. Other attractive characteristics of
the Ark-La-Tex properties include low decline rate of
approximately 7-8% annually, reserve life of approximately 18.3
years, active hedges, as well as low-risk drilling locations.
The potential acquisition - which is likely to be sealed by early
Aug subject to customary closing conditions - is expected to be
immediately accretive to Houston-based QR Energy's cash flows.
Importantly, the addition of the acreage will boost growth
prospects of the partnership in the East Texas field, one of the
country's largest onshore oil plays. Following last year's twin
transactions, QR Energy already possesses significant development
opportunities in the region.
New York-listed QR Energy, which plans to finance the deal
through a combination of cash and credit, is engaged in the
acquisition, exploration, and development of oil and gas
properties. The partnership's operations are concentrated
primarily in the Texas, Mid-Continent and Gulf Coast regions.
With a juicy distribution yield of 11%, a business model focused
on operational efficiencies and attractive acquisitions/growth
projects, QR Energy provides investors with a steady, predictable
income stream. However, the partnership's exposure to the
inherently cyclical and volatile exploration and production
sector offsets these strengths and remains a key area of concern.
As a result, QR Energy currently retains a Zacks Rank #3 (Hold),
implying that it is expected perform in line with the broader
U.S. equity market over the next one to three months.
Meanwhile, one can look at
Delek Logistics Partners L.P.
TC PipeLines L.P.
Summit Midstream Partners L.P.
) as good buying opportunities. These energy pipeline
partnerships - sporting a Zacks Rank #1 (Strong Buy) - have solid
secular growth stories with potential to rise significantly from
DELEK LOGISTICS (DKL): Free Stock Analysis
QR ENERGY LP (QRE): Free Stock Analysis
SUMMIT MIDSTRM (SMLP): Free Stock Analysis
TC PIPELINES (TCP): Free Stock Analysis
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