Upstream MLP Mid-Con Energy Slashes Distribution
By: Tim McPartland,
Smaller usptream MLP Mid-Con Energy (ticker:MCEP) has slashed their distribution by 80% today (we have updated our spreadsheets). This cut is deeper than the approximate 50-55% cuts announced recently from other upstream companies. In our opinion the survivors will cut deep and cut early–those that are dragging their feet on cuts are playing with fire as they are spending their future liquidity as most will be at risk of large reductions in their revolvers when the lenders do their ‘redeterminations’ in the next couple of months.
Fortunately Mid-Con does not have any preferred stock issues outstanding or they would have been bloodied by this large distribution cut. Just 3 days ago we wrote an article ‘Stand Clear of Energy Issues‘ and while energy issues. In this artlcle we wrote that most upstream MLP’s would likely eliminate their distributions before the year was out–and Mid-Con almost did it in 1 fell swoop.
All of this goes back to our warning that those trying to pick a bottom are way too early in this game–we can see in the trading that investors are trying to pick the bottom as shares tumble and then bounce a bit before getting slammed again. Mid-Con had a huge bounce yesterday before getting knocked back down 13% today.
Remember, that while it didn’t get too much play on Thursday, crude oil inventories took a massive 10 million barrel jump as refiners cut back on purchases in order to get the oversupply of gasoline drawn down.
The bottom line is we will not be trying to be a hero and pick a energy bottom until fundamentals dictate we are near a bottom.