Wunderlich: Degradation In Upstream MLP Valuation Continues

Abhishek Sinha of Wunderlich Securities commented in a note on Tuesday that while the decline in oil prices have been largely contained over the last two weeks, the degradation in upstream MLP valuation continues as natural gas prices begin tumbling amid a warn winter season so far. “The additional weakness in NGL and natural gas prices has exacerbated the concerns of distribution cuts,” Sinha wrote. The analyst adds that Atlas Resource Partners ARP and Vanguard Natural Resources VNR have already announced flat month distributions for the month of November. Sinha expects to gain further clarity on individual companies' 2015 outlook during their respective fourth quarter earnings releases starting next month. The analyst also notes that Memorial Production Partners MEMP is a “top pick” and have risen 18 percent this month, despite the rest of the upstream MLP stocks trading in negative territory. The company maintains a “strong hedge book” along with a balanced product composition and “solid financial strength” that translates to a positive risk-reward proposition that is attractive in the current environment.