NEW YORK (TheStreet) -- Shares of Eagle Rock Energy Partners, L.P (EROC - Get Report) are down -16.08% to $4.07 on Thursday after the company announced it's suspending its quarterly distribution "in order to preserve liquidity in advance of closing the contribution of its midstream business to Regency Energy Partners (RGP)."
The company, which is a limited partnership that operates in the business of gathering, compressing, treating, processing and transporting natural gas, reported on Feb. 27, 2014 that the FTC requested additional information regarding the midstream business contribution.
"This has extended management's original time frame for closing the transaction and created the need to preserve greater liquidity in the interim to fund growth capital expenditures and other financial obligations,' Eagle Rock said.
"In our view, the distribution suspension is a negative and another blow to weary [Eagle Rock] investors that already endured a previous cash distribution cut and unit price under performance," said Bank of America (BAC - Get Report) in a report published Thursday in which the firm reiterated a neutral rating on the company.
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TheStreet Ratings team rates EAGLE ROCK ENERGY PARTNRS LP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate EAGLE ROCK ENERGY PARTNRS LP (EROC) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 206.2% when compared to the same quarter one year ago, falling from -$55.16 million to -$168.93 million.
- The debt-to-equity ratio is very high at 2.18 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, EROC has a quick ratio of 0.69, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EAGLE ROCK ENERGY PARTNRS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $25.18 million or 27.01% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, EAGLE ROCK ENERGY PARTNRS LP has marginally lower results.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 52.23%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 179.48% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: EROC Ratings Report