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What: Shares of oil and gas company Atlas Resource Partners, L.P. (UNKNOWN:ARP.DL) dropped as much as 10% today after the company announced an acquisition and a stock sale.
So what: After the market closed yesterday, Atlas Resource Partners announced it would buy natural gas properties from Atlas Energy Group (NASDAQOTH:ATLS) for $35.5 million. To pay for the assets, the company is selling 6.5 million shares, with a potential overallotment of 975,000 shares, which were priced at $7.97 per share this morning.
Now what: There don't appear to be many investors happy about the deal today, since shares of Atlas Resource Partners have fallen well below the offer price for shares. Investors may be worried that the returns on new natural gas wells today might not be as attractive as just maintaining the old assets. I definitely don't see this as a reason to buy today, but watch how cash flow evolves in coming quarters, because that's what will tell whether this company is generating the returns that will allow for a solid dividend going forward.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.