This past week was a tough one for energy companies. Oil prices took another dive due to the continued fallout from OPEC's decision last Friday to keep pumping at max capacity. While this sent most energy stocks on a downward spiral, there were a couple of news-driven catalysts that put even more weight on a handful of companies. Among the worst performers, according to S&P Capital IQ data, were Seadrill Partners (NYSE:SDLP), NGL Energy Partners (NYSE:NGL), and Vanguard Natural Resources (OTC:VNRSQ).
Being MLPs, the big worry with these three is the potential for distribution cuts. News that a leading midstream company had surprisingly cut its dividend 75% this week sent shock waves through the sector. That move caused analysts to point their fingers at the next shoe to drop, with Vanguard Natural Resources, in particular, being noted as a company that needed to take another ax to its payout. An analyst said that even though its coverage ratio and leverage were better than its peers, Vanguard Natural Resources still needed to bite the bullet and eliminate its distribution.
NGL Energy Partners was another company that distribution-cut worries weighed down this week. That's even after the company came out and said that it wasn't considering cutting its payout. That affirmation did little to calm investors, because NGL Energy Partners still needs to find a way to fund its growth with external capital -- which is getting tougher to do because of the weak oil market.
Meanwhile, Seadrill Partners, as well as its parent company Seadrill (NYSE:SDRL), slid this week after the offshore driller announced that it agreed to new one-year contract extensions for two of its rigs. Normally, this would be good news, but Seadrill exchanged a lower dayrate for the entire term of the contract for that extra year, which didn't sit well with investors.
To learn more about why these stocks moved so sharply this week, check out the following slideshow.