Compressco Partners LP Presents Potential Opportunity

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Last week Compressco Partners LP (ticker: GSJK), a master limited partnership which primarily deals with compression at the wellhead of oil and gas wells announced a massive new offering of units–as many as 17,000,000 (which will double their outstanding units).  The intent is the purchase of a privately held compression company (Compressor Systems Inc) for $825,000,000.  Compressor Systems is 3 times the size of Compressco Partners  LP and the GSJK has announced the intent to raise their distribution by 15% for the 4th quarter of this year.

The point of this note is not to point out anything in particular about Compressco, but instead is to raise the flag on a potential opportunity that may arise when this offering is priced.

GSJK traded last week as high as $27.42 last week before trading off and is now at $25.30 (part of this dip was it went ex-dividend a week ago).  Current yield is 7.15%–and the promised dividend raise (of 15%) will move the needle closer to 8%.

The point of this note is that when pricing is announced it may create a sharp unit price drop that could be an opportunity to buy–for investment or ‘flip’.  Average daily volume of GSJK is just 25,000 shares–so bringing 17,000,000 shares to market could really put the skids on the unit price.  If it were to drop a dollar or 2 we will be buyers—but we will be in no hurry as the opportunity for purchase may last a week or two.

Compressco Partners LP website is here.

Here is a chart of GSJK–

 

 

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