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Merrill Lynch chooses a new MLP from its Upstream

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Merrill Lynch is transferring its stock coverage from Nitin Kumar to John Abott. The company is reassessing its positions and relations with a few of its limited master partnerships (MLPs).  Where some partnerships resulted in a 20 percent excess, the company on average saw a decrease of 50 percent in its MLP upstream in a matter of just one year. The market analysts are now concerned as to whether these partnerships can keep up with their distributions or not.

Two companies, including Legacy Reserves L.P. (NASDAQ: LGCY) and Breitburn Energy Partners L.P. (NASDAQ: BBEP) suggested that the distributions should be cut down if the oil prices stay at low figures. Merril Lynch is not downgrading the ratings of any of its partnerships, despite their doubtful outlook; most of the companies still have their ratings in ‘Neutral’ or ‘Buy,’ which shows that Merril Lynch is still confident about their long term progress. Nonetheless, it would be a mistake to assume that the situation would get any better in the year 2015 if the oil prices remain weak.

For 2015, the company looks forward to its big theme of unit buybacks.  Considering the fact that some of the companies gave a yield of 20 percent, it would completely make sense to buy back some of the troubled stocks. Memorial Production Partners L.P. (NASDAQ: MEMP) recently announced that it would be repurchasing the units for a total of $150 million.

Merrill Lynch has chosen Memorial Production Partners, out of all its MLPs, to be the upstream MLP for the year 2015. Memorial Production Partners is down by 40 percent on yearly basis, and the stocks are currently being traded at the rate of 16 percent. Coming to the liquidity of the company, the firm’s total assets have calculated to be around $1 billion.  These assets together with the hedges should be able to provide enough cash for the distributions in the years 2015 and 2016.

Talking about the price objective of the company, Merrill Lynch reduced the price from $24 to $22. As far as the consensus target price is concerned, the figures currently stand at $20.55. The stocks of Memorial Production Partners, on December 19, were recorded to trading at a price of $14.41 (10 percent higher than the previous day).

The report, which Merrill Lynch posted, includes some other objectives. The company reduced the target price of EV Energy Partners L.P.’s (NASDAQ: EVEP) by 24 percent, and hence bringing the value from $42 to $32. The consensus target price on the company’s stocks is recorded to be at $34. As far as the 52 week range is concerned, the figures are recorded to be around $20.01 to $41.97.

Coming to Legacy Reserves, Merrill Lynch reduced its target price by 38 percent, bringing the numbers to $18 from previously held figures of $29. The average price target on the stocks is reported to be at $21.13, with a one year trading range of $10.05 to $32.61.

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