Stifel Downgrades Breitburn Energy Partners, LRR Energy And New Source Energy Partners

Stifel on Tuesday downgraded Breitburn Energy Partners L.P. BBEP, LRR Energy, L.P. LRE and New Source Energy Partners L.P. NSLP to Hold due to pressure in the commodity markets and near-term concerns over credit facilities.

Analyst Brian Brungardt commented that Breitburn Energy Partners “ability to fund its reduced organic capex spending while funding the near-term shortfall in DPU coverage will be challenged. That being said, we believe the situation is manageable.”

“We believe the near-term issues are largely the result of bad timing in which BBEP acquired debt from QRE deal without sufficient time to term out a portion of its facility nor sufficient time to integrate and grow the combined cash flows. We continue to believe the long-term outlook is attractive with the partnership’s diversified geographic footprint,” according to the analyst note.

Brungardt believed LRR Energy “does not pose operational risk and [was] cognizant the market is likely pricing in at least a DPU cut, we are moving to the sidelines given the near-term financing issues.”

Brungardt also stated that “a Hold is a Hold as we believe [LRR Energy] does have attractive options beyond FY15 particularly with potential acquisitions from Lime Rock Resources Fund 2.”

For New Source Energy Partners, Brungardt believed the moves “it has made over the past year to transition to the oilfield services sector will prove to be beneficial over the long-term life of a commodity cycle. Given the collapse in NGL prices related to the E&P business, we believe the partnership is already in a better position with its diversified mix.”

The analyst note concluded that “when combined with the series of capex cut plans from E&P C-corps, we believe near-term metrics [for NSLP] may prove challenging.”

Shares of all three companies fell Tuesday morning with New Source Energy Partners hit the hardest as it recently traded at $7.18, down 5.65 percent.

Breitburn Energy Partners recently traded at $7.26, down 0.68 percent and LRR Energy recently traded at $7.25, down 1.76 percent.