Eagle Rock Energy Partners, L.P. (NASDAQ:EROC)

CAPS Rating: 3 out of 5

The Company is engaged in the business of gathering, compressing, treating, processing, transporting and selling natural gas and fractionating and transporting natural gas liquids.


Player Avatar NtscrbEnergy (78.83) Submitted: 3/20/2007 7:58:31 AM : Underperform Start Price: $11.43 EROC Score: +116.21

Eagle Rock Energy Partners, L.P. is primarily a master limited partnership involved in gathering, processing, transporting and selling of natural gas and natural gas liquids, with operations located in Texas and Louisiana. The company operates over 4500 miles of natural gas gathering systems and over seven active processing plants. Its revenues are largely generated by sale of natural gas and natural gas liquids that together contribute about 75% of the over all inflows. While the company also generates a sizable fee based income for providing gathering, compression, and processing services.
Eagle Rock Energy current performance though has been strong, amidst of Jasper NGL line and Masters Creek gathering system acquisition in 2006. Still the lower commodity prices have made it difficult for the company to deliver the performance as per its S-1 guidance levels.
Looking ahead in 2007, the company has further lowered its guidance as a result of continued lower natural gas liquids prices and slow well completion leading to delays in gathering volumes. Though maintenance and operating costs are expected to decline in the second half of 2007, due to completion of Tyler County Pipeline extension project that allows the company to deliver gas directly to its Brookeland processing plant. It will be only be until 2008, when the benefits will be completely realized. Moreover, with the cash distribution for the rest of the quarters of 2007 in doubt, as company might curtail distribution to plough back some cash for future growth, which could come as a negative news for a short term investor. Furthermore, it will be very difficult for the company to beat the benchmark in 2007, especially if the commodity prices continue to trade at current levels.

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