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Eagle Rock Shares Popped: What You Need to Know

By Matt Koppenheffer | More Articles
April 13, 2011 | Comments (1)

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of natural-gas-focused partnership Eagle Rock Energy Partners (Nasdaq: EROC  ) shot up as much as 19% in intraday trading on heavier-than-average volume.

So what: When a company announces its acquisition of a publicly traded target, you can expect to see the latter's stock rise. But it's far more unusual to see the acquirer's shares increase -- much less to the degree that Eagle Rock's did today. After the close of trading yesterday, Eagle Rock announced that it will acquiring privately held Crow Creek Energy, a natural gas company with 268 Bcfe of proved reserves, for $318 million in cash and stock. Eagle Rock will also assume $207 million in debt.

Now what: The acquisition seems to be a good fit for Eagle Rock, and management noted that it continues the company's focus on building its upstream and midstream businesses. While I'm always cautious about chasing a big gain like this, with a perfect five-star rating from The Fool's CAPS community and an eye-catching 5.8% distribution rate, Eagle Rock could be worth a closer look. 

Want to keep up to date on Eagle Rock Energy Partners? Add it to your watchlist.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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  • Report this Comment On April 13, 2011, at 3:52 PM, zorro6204 wrote:

    "An eye-catching 5.8%"?? That's low for a midcap, especially one that was carrying a heavy debt load like EROC, which had (had) the highest ratio of net debt to cash flow of any of them.

    The reason the units popped is simple, they advanced the promised 75 cent distribution to Q2 2011, and guided to a buck at the end of 2012. That's presently a really "eye catching" 8.5% yield on the future distribution, so the units have some room to move up over the next 18 months, depending on how MLP's are priced to yield.

    There. Does that solve the mystery for you? I mean, dang.

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5/25/2012 4:00 PM
EROC $8.94 Down -0.09 -1.00%
Eagle Rock Energy… CAPS Rating: *****

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