EV Energy Partners' Earnings Look Impressive

Master limited partnerships can be attractive investments if they get their businesses right. EV Energy Partners (Nasdaq: EVEP  ) could be one such stock whose impressive third-quarter results are worth a second look.

Effective strategy
Taking the acquisitions route to expand, this limited partnership formed by oil and gas asset manager EnerVest, has done a pretty fine job. Net income stood at $88 million -- a 51% jump from the third quarter last year. However, I wouldn't want to dwell on this figure too much, as it contains a big chunk of unrealized gains on derivatives. Income from core operations (excluding any non-cash items or gains from asset sales) rose a solid 111%, to more than $13 million in this period, which is why I'm impressed.

Focus on the long term
Net production rose 44%, which is definitely worth delving into. The trusted Barnett shale play has played a stellar role here. Acquiring long-lived assets with shallow depletion rates has been this company's forte and this strategy seems to be proving effective. Natural gas production rose substantially, by 48%, and further growth looks potentially good. EV Energy has already closed additional acquisitions worth $975 million from EnCana (NYSE: ECA  ) .

In short, the company holds properties in nearly every interesting shale play. I'm interested in the upcoming Utica shale play. Chesapeake Energy (NYSE: CHK  ) , which operates some of the company's properties there, has entered into a joint venture with a third party to develop 650,000 acres. This should benefit EV Energy in a big way.

The dividend's looking good
The biggest draw comes from the fact that this company pays out an impressive dividend of 4.1%. While this might not sound like much, the payout of $3.04 per unit is quite impressive. The stock has shot up by an awesome 94% in the past 12 months, which has considerably diminished the yield percentage. Compared to Cheniere Energy Partners (AMEX: CQP  ) , which pays $1.70, and Linn Energy (Nasdaq: LINE  ) at $2.70 per unit, EV Energy seems pretty impressive.

Foolish bottom line
For someone in the business of natural gas production, a master limited partnership sounds just right. The company needn't worry about tax burdens on top of an already bearish market for this commodity. This strategy definitely seems to be working to EV Energy's advantage. EV Energy is on the right track.

The Motley Fool can help you keep track of fresh news and analysis about this company. All you need to do is add it to your watchlist. It's free.

Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (4)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 11, 2011, at 6:32 AM, opalesque wrote:

    Since 2003, MLPs as an asset class have grown from $30bn in investment to $300bn today, and have also been the best performing asset class in the world over the last 10, 5, and 3 year periods. Swank Capital with its focus on energy MLP's has grown to $1.5bln in assets under management during that same period.

    To get more details about Swank Capital visit this video: http://www.opalesque.tv/hedge-fund-videos/Jerry_Swank/1

  • Report this Comment On November 18, 2011, at 3:34 PM, mortsmith wrote:

    I don't understand why Issac is impressed with EVEP'S dollar amount, rather than the %. LINE & CQP pay about double the div. of EVEP on a % basis. The dollar amount is less, because their current prices are much less than EVEP. So, clearly, $1.000.00 invested in either of them would bring you a lot more $ in divs.I'm not speaking to the wisdom or investing in any of them.

  • Report this Comment On December 10, 2011, at 10:23 AM, gimponthego wrote:

    Big John has done such a splendid job with EVEP..who's to say he won't bring it all the way home ?

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