Atlas Pipeline Partners slashes dividend

Posted by Tim

January 29, 2009

tlas Pipeline Partners | Investor Relations : News Release.

Atlas Pipeline Partners (APL: 14.24 0.00 0.00%) has announced a 4th quarter distribution of 38¢ per share, down significantly from the 96¢ of the previous quarter. This borders on good news as the market has been pricing APL like it would not be able to pay any distribution or even stay solvent. The market liked the announcement, adding 17% to APL’s value on Wednesday. The new payout rate still give the stock a 20% yield.

Shareholders of the traded general partner, Atlas Pipeline Holdings (AHD: 6.32 0.00 0.00%) did not fare as well. The distribution for AHD was reduced from the previous 51¢ to just 6¢. General partner LP’s are a leveraged bet on continued distribution increases of production LP’s. As you can see a distribution reduction is not a happy occurance for the GP.

From the press release it appears that APL was able to reduce their debt load by something like $80 million. Total debt is in the neighborhood of $1.5 billion, so they have a long way to go. Probably the most encouraging note in the release was this line:

We are hopeful that NGL prices (up approximately 50% from December 2008) will continue to recover, and that our unitholders may receive the benefit from such recovery.”

A significant portion of Atlas Pipeline’s revenues are generated from the sales of NGL, so this is a good sign. My last post concerning APL discussed considering the stock as a call option on increasing energy prices while collecting any distributions that come along, I believe the theory still holds.

Note: APL is a component of this site’s hypothetical Income Portfolio.