Phil Falcone Likes The Good Crosstex Energy

Phil Falcone of Harbinger Capital Investments was at the Ira Sohn Conference yesterday, and gave Crosstex Energy, Inc. XTXI as his investment idea. Falcone likes that Crosstex Energy is one of the few publicly traded general partners in a C Corp. asset structure. It owns 16.4 million units of Crosstex Energy, L.P. XTEX, 100% of the distribution rights, and 100% of the general partnership. Falcone said this structure is very attractive, as it pays no corporate level taxes. It also owns a Louisiana interstate gas pipeline, 2,100 miles long, that is also a very valuable asset. The processing of natural gas liquids is another key asset, which could help push shares higher. Falcone cautioned that it is not a pure natural gas and oil play, but rather about processing and transportation. The company has several areas of growth, including 10-15% of organic growth. He thinks the $200 million in EBITDA that the company's management projected could be as high as $230 million, and get it up to $240-$250 million by 2012. The company also has a cash distribution rate of 1.3, and if the rate gets moved up to 1.1, which is where its competitors are, the dividend could be boosted significantly. Falcone said that XTXI is a betterplay than XTEX because a 30% growth of the dividend at the XTEX level translates into a 90% growth at the XTXI level. Falcone believes the stock could get to $18 to $20 per share if the company can deliver on its EBITDA growth, which would be an 80% to 100% return from these levels.