MLPs for High Yield

[dan_s]

Below is cut from J P Morgan's report on MLPs that they published on 3/24. BBEP, MEMP, VNR and LINE are all in our High Yield Income Portfolio. To some extent, I agree with JPM's comments on LINE but I think at this point it is oversold. If you still own it, HANG TOUGH. LINE probably won't raise their distributions this year, but I doubt it will cut them either. LINE's current annual yield is over 10%, which isn't a bad place to be stuck. See note at the bottom. - Dan

From J P Morgan report:
"In this report we update our E&P MLP models for 4Q13 results, newly
issued or revised guidance, recent events, and 10K filings. As a result of
the aforementioned updates, we’ve revised several ratings and price targets
to highlight names with higher total return potential relative to the E&P
MLP peer group. We continue to rate BBEP, MEMP, and VNR
Overweight as we forecast over 20% total return across all three names.
We downgrade LINE and LNCO to Neutral following significantly lower
than expected guidance, mostly due to the capital intensity of the newly
merged assets. We remain Neutral on ARP and EVEP. We downgrade
LGCY and QRE to UW as we forecast both names to achieve a total return
of less than 10% in 2014."

Read this: http://www.fool.com/investing/general/2 ... ution.aspx

I keep LINE in our High Yield Income Portfolio because I think their revenues are going to get a significant boost from the spike in natural gas and NGL prices. Very little of their NGLs are hedged. I also think the Berry deal is better than most analysts think it is. It will take a few quarters before there is A clear picture of what Linn Energy really looks like "post merger". - Dan

[dan_s]

JPM comments: "BBEP: Maintain Dec 2014 PT of $23; reiterate OW rating. We
maintain 2014 estimates as higher than expected A&D guidance lifted
earnings but forecast equity issuances and higher than expected SG&A
expense guidance largely offset accretion due to tight credit metrics
(LTM Debt/EBITDA > 5.0x). We lift 2015 estimates modestly as a result
of increased A&D activity. Our distribution forecast of >5% in 2014 and
2015 remains intact. We maintain our DCF-derived Dec 2014 price
target of $23 and reiterate our Overweight rating."

Why do these guys have to speak in "analyst code"?

BBEP is hosting a luncheon for us in Dallas on April 16. Seating is limited so register early. - Dan

[dan_s]

MEMP: Maintain PT of $25 and reiterate OW rating. Following a
challenging fourth quarter due to operational issues and weather, MEMP
maintained 2014 guidance and announced a bolt-on acquisition. We lower
2014 estimates modestly due to weather issues and operational issues that
leaked into 1Q14, partially offset by the East Texas bolt-on acquisition. We
maintain our DCF-derived Dec 2014 price target of $25 and reiterate our
Overweight rating.

VNR: Maintain PT of $35 and reiterate OW rating. We adjusted
estimates for management’s 2014 guidance and the newly issued Class B
perpetual preferred units, reducing estimates to account for the lower than
expected DCF guidance as well as the impact of cash payments to preferred
unitholders. We see plenty of headroom for VNR to lever up during 2014,
allowing for greater accretion during the M&A process. We maintain our
DCF-derived Dec 2014 price target of $35 and reiterate our Overweight
rating.