Forgive, Forget and Collect

Alliance Holdings (Nasdaq: AHGP) increased cash distribution to unitholders for the second quarter to $0.87 per unit, or an annualized rate of $3.48 per unit, payable on Aug. 19 to unitholders of record as of close of trading on Aug. 12. The declared cash distribution is a 10.8% above that in the same quarter in 2013, and management intends to maintain that growth rate for the remainder of the year. At the Aug. 1 unit price of $70.17 the yield was 4.96%.

For the second quarter, AGHP reported record earnings of $77.3 million, up 26.8% from the prior year’s quarter. Revenues rose 8.1% to $598.6—also a record—as robust coal sales volumes and higher production contributed to the strong quarter.

Units of AHGP gained 2.8% immediately following the earnings announcement and are up 8.6% for the month of July. Buy AHGP up to $77.

AmeriGas Partners (NYSE: APU) reported a 20.1% decline in the partnership’s adjusted EBITDA (earnings before interest, income, taxes, depreciation and amortization) for the third quarter as a warm spring depressed demand. But the past year’s worth of EBITDA was up nearly 10 percent from a year earlier, and management reaffirmed its adjusted EBITDA guidance for 2014 in the range of $660 million to $675 million, the low end of which would be up 7% from last year. Units of APU fell 1.1% in July and currently yield 7.9%. The distribution announced in July, payable on Aug. 19 to holders of record as of Aug. 11, represented a 4.8% increase year-over-year. We recommend #9 Best Buy APU below $51.

Atlas Resource Partners (NYSE: ARP) announced distributable cash flow (DCF) of $54.5 million, or $0.57 per unit for the second quarter of 2014, up from $41.3 million a year ago. The DCF, adjusted to include a full quarter’s contributions from recent acquisitions, still fell slighly short of the declared distribution of the $0.583 in per unit distributions paid during the quarter.

The production increase was largely due to coalbed methane deposits acquired over the last year, which now account for nearly half of ARP’s production.

The monthly June distribution of $0.1966 per unit, or $2.36 annualized, payable Aug. 14 to holders of record as of Aug. 6, represents a 9% boost from a year ago. At the Aug. 1 unit price of $19.84, the latest payout produced a yield of 11.9%. On the quarterly conference call, management complained about the unit price and said it would not sell more equity near current levels barring an exception acquisition opportunity. ARP is devoting much of its own drilling to oil and liquids-rich prospects in Texas, and also has high hopes for a boost from its recently acquired minority non-operating interest in a mature Colorado oilfield from Chevron (NYSE: CVX). But in the meantime distributions are running far ahead of the cash from operations less maintenance spending, so ARP remains an show-me story in need to an operating boost. We’re lowering the buy limit on ARP to $20 pending stronger distribution coverage and organic production growth.

Boardwalk Pipeline Partners (NYSE: BWP) announced distributable cash flow fell 17% to $124.1 million. Excluding a one-time gain of $17 million on the sale of storage base gas a year ago, the partnership’s results were relatively flat compared with the second quarter of 2013.

BWP maintained its 2014 DCF guidance of $400 million, but noted that the $40 million annual drag from south-to-north gas contract expirations remains incorporated in that forecast, despite the somewhat better, weather-driven performance in the first half of the year. In the meantime Boardwalk continues to work on new deals to ship shale gas from the Northeast south to supply Louisiana petrochemical and pending LNG export projects. And though distributable cash flow was nearly five times the size of the latest quarterly distribution of $0.10  per unit, slashed by 80% in February, Boardwalk gave no sign the payout is about to rise while contract expirations continue to loom, even as the partnership invests in growth projects. The current payout works out to a yield of 2.1%. BWP’s unit  price rose 4.4% in July. BWP remains a Hold.

Buckeye Partners (NYSE: BPL) reported second-quarter DCF of $94.4 million, down from $112.1 million a year ago. Income from continuing operations for the quarter fell 27.8% to $61.9 million. While the  Pipelines & Terminals and Global Marine Terminals segments posted solid results, the Merchant Services unit lost $26.2 million on gasoline inventory it had to sell at a loss after a new growth strategy failed to pay off. DSeclining ethanol prices also were a drag. The unexpected loss wiped out nearly half of the profit posted by Marchant Services over the last six years, and left Buckeye’s distribution coverage a substandard 0.73x as the partnership stuck to its distribution growth plans. Management replaced the the unit’s top executive and said new risk controls would prevent a repeat of the second-quarter losses. The unit price slid as much as 6% on news of the miss, but recouped much of that loss by the session’s close.  

The unit price slid 4.6% in July. The partnership announced a quarterly distribution of $1.1125 per unit, up 4.7% from the second quarter of 2013. BPL is a Buy up to $70.

CVR Refining (NYSE: CVRR) reported adjusted EBITDA for the second quarter came in at $192.9 million, down from $250.6 million for the second quarter of 2013. The partnership’s refineries processed combined crude throughput of 212,047 barrels of oil equivalent per day (boe/d) during the quarter, ahead of its guidance of about 198,000 boe/d. However, the improved throughput volumes were offset by weaker-than-expected refining margins, which dropped to $13.96 per barrel from $19.18 a year ago. Available cash for distribution for the quarter was $142.8 million, down from $200.5 million the prior year.

CVRR announced a second-quarter cash distribution of $0.96 per unit to be paid Aug. 18 to unitholders on record as of Aug. 11. That brought cumulative cash distributions declared for the first six months of 2014 to $1.94 per unit. On that basis, the annual yield is at 16.5% for this variable distribution partnership.

The unit price has dropped to a three-month low after treading water in July. But we remain confident about the long-term fundamentals and the value proposition here. CVRR remains a Buy up to $26.

DCP Midstream Partners LP (NYSE: DPM) reported DCF of $93 million for the second quarter, up from $68 million in the same quarter in 2013. The increase was attributed to growth from dropdowns and organic projects and was in line with management’s projections for the quarter.

DPM increased its distribution 6.7% year-over-year to $0.7575 per unit, or $3.03 annualized. The distribution will be paid on Aug. 15 to unitholders of record as of Aug. 8.  The yield stands at 5.6% based on the Aug. 1 unit price of $54.17. The partnership generated a 0.90x coverage ratio adjusted for the timing of actual distributions paid, but 1.1x based for the trailing 12 months, and said it remains on track to meet its DCF guidance for the year.

The unit price fell 5% in July. DPM is a Buy under $60.

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