9% Yielder That Cannot Sustain Its Distributions

Crude oil and natural gas related LPs have struggled since 2015 due to declining commodity prices. As a result of low revenues, several companies have suspended distributions even to preferred shareholders, such as Legacy Reserves (Nasdaq: LGCY). I continue to analyze other LPs that remain distributing cash to their shareholders and determine the sustainability of the distributions. Recently, I discussed why I believe that Martin Midstream (Nasdaq: MMLP) should slash its distributions.
In this article, I would like to focus on Archrock Partners, L.P. (Nasdaq: APLP). The MLP distributes $0.285 per quarter, yielding 9%. Let this be the starting point of your research for you to determine whether the distribution is sustainable.
The macro outlook As I mentioned in the other articles, the World Bank expects a prolonged price recovery for crude oil and natural gas. Crude oil is expected to trade close to $55 per barrel on average for 2017, and natural gas is projected to trade at $3.00 per MMBTu.
Today, I do not see a catalyst that would push the commodities prices higher. There have been meetings and talks among OPEC members, but so far, there is no tangible strategy to cut production in the interim in an effort to drive prices higher.


APLP’s distributions are not sustainable The biggest problem that I have with APLP is the fact that as of the first six months of 2017, the company’s cash flow from operating activities does not cover the capital... Read more

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