The deed is done, the boil lanced, the painfully sticky band-aid scraped off at last. Three months after signaling its payout was unsustainable, Enbridge Energy Partners (EEP) finally slashed it 40% to an annual $1.40 per unit Friday in the name of financial stability.

The slimmed down MLP is using proceeds from the sale of its recently draining gas processing sideline to pay down debt, and to pitch the crude pipelines it retained as a bedrock of long-term stability.

The restructuring will provide coverage of 1.2x on the reduced distribution, set to yield an annualized 7.2% after Friday’s relief rally lifted the unit price 4%.

The new payout is fully backed by firm, long-term crude shipping contracts with no direct commodity exposure, and related growth projects are expected to support distribution increases of approximately 3% a year through 2020. These expansions are to be financed largely with retained cash flow, allowing leverage to drop from 4.5x EBITDA at the end of this year to 4x three years later.

Sponsor Enbridge (ENB) also simplified its incentives such that it will net 23% of future growth in distributions per unit at EEP – very manageable given its modest current skim and the MLP’s low near-term growth rate.

The finances of EEP – and by extension of its dividend-paying proxy Enbridge Energy Management (EEQ) – are in fact on much firmer footing as a result.

EEP might eventually be able to speed up growth by buying more Enbridge assets, but analysts who tried to coax more specifics out of management on Friday’s conference call had no luck. For the moment, EEP seems content to offer a total return proposition of 10% or so between the current yield and likely growth.

At 7.2% EEP’s yield is now largely in line with that of Plains All American (PAA), likely its most comparable peer. PAA offers the prospect of significantly faster growth at higher crude prices, but its crude gathering operations are a lower quality profit stream than EEP’s long-haul contracts.

While those commitments provide plenty of protection, EEP and EEQ will remain sensitive to crude prices, since higher ones would provide much more growth in the long run. And that in turn makes it easy to stay with this trade on expectations of what $65 a barrel might do for EEP as early as next year.

At that oil price, $23 or so for EEP wouldn’t be out of line. We’ll use that as the new buy limit of EEP as well as EEQ.

Earnings Galore

We’re in the thick of the energy earnings season, with more reports worth highlighting than there’s time. Here are brief updates for a couple of currently unloved and underrated portfolio picks.

Helmerich & Payne (HP) was down as much as 8% at the lows following its results Thursday, and its share price is now off 10% after merely increasing its fleet of deployed rigs by 30% in the course of the quarter, while spot pricing improved 9% and its U.S. land rig market share rose 2 percentage points to 19%.

Despite the one-time cost of taking so many rigs out of mothballs, HP generated $76 million in operating cash flow. It forecast a 25% sequential increase in “revenue days” – contracted rigs times days – in the current quarter, which would mark a leveling off from the last quarter’s 35% increase.

Pricing is still far from what it was at the market peak three years ago, of course, and in fact revenue was down 7% year-over-year as longer-dated contracts rolled off and the rigs were redeployed at lower spot rates. Management noted that the rate of inquiries for rigs had leveled off of late as crude pulled back to $50.

Looking at HP’s cash flow and fleet economics over the entire cycle and the longer-term macro factors driving crude prices, I remain unabashedly bullish. The company controls the most advanced idle rigs seeing the biggest price gains right now, has increased its U.S. land market share from 15% in ’14 to 19% today and is still generating cash. Shale output is being supported by a backlog of drilled but uncompleted wells that’s getting worked down pretty quickly. Soon, there will need to be more drilling to maintain shale output and growth rates, and perhaps to meet global demand that shows no sign of slowing down. We might need $60-65 crude to see this stock pay off. We’ll get there. Growth pick HP is a buy below $77.

We’ll also get to $4+ per mmBTU on natural gas eventually just on coal power plant retirements alone, and when that happens you’ll probably end up kicking yourself for not buying more of EQT (EQT) at its recent/current lows. 

The market is disappointed with early 2017 production growth (+6% yoy) and low-key full-year target, but EQT is promising to average 18% growth annually in 2018-2020 and there’s no reason to doubt this well-managed company and leading Marcellus operator can achieve that.

Quarterly numbers suffered because the company got choosy about service providers early in the year and then found additional fracking crews hard to come by as the entire industry ramped up. What EQT haven’t delayed is consolidating pockets of leaseholds around its core position, a strategy that is enabling 30% longer laterals than were drilled, on average, two years ago, which is in turn resulting in lower development costs per unit of production and higher overall resource recovery estimates.

The stock has been weak and this wasn’t a report to change that obviously, but there are few if any oil and gas producers I’d rather own for the long haul. EQT expects to generate $1.3 billion in operating cash flow this year, even at historically low realization prices, to fund $1.5B in capital investments that will set up that much faster growth trajectory next year. This is an excellent opportunity to pick up a quality stock on sale, and with lots of upside to higher oil and gas prices. Aggressive pick EQT is the #3 Best Buy below $80.