Why Vanguard Natural Resources, NGL Energy Partners, and Seadrill Partners All

Crashed This Week

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 (NASDAQ: VNR). 

What:MLP NGL Energy Partners (NYSE: NGL) slumped more than 29% this week.

So What: Key driver: NGL Energy

Partners says it won’t cut its distribution, but it won’t increase it either

The company believes that it can fund its $350 million to $400 million in capex through a combination of preferred equity, asset sales, bank debt, and unsecured indebtedness

Now What: The company also ruled out

acquisitions, saying that these would not be accretive in the current environment

Key takeaway: Investors are worried about the company's ability to fund its growth externally, even though it's standing by the payout

What:Deepwater driller Seadrill Partners (NYSE: SDLP) plunged more than 33% this week.

So What: Key driver: Seadrill and

Seadrill Partners agreed to a one-year contract extension for two rigs operating in Thailand

While the extension will keep the rigs working until mid-2019, it comes at a much lower dayrate, effective as of Oct. 1

Now What: That lower dayrate will

decrease Seadrill’s earnings over the term of the original contract

Key takeaway: Investors are growing concerned that Seadrill and Seadrill Partners might need to accept lower dayrates for all of their rigs

What:Oil and gas MLP Vanguard Natural Resources (NASDAQ: VNR) crashed more than

41% this week.

So What: Key driver: An analyst at

Janney said that Vanguard Natural Resources should cut or eliminate its distribution

The analyst isn’t saying a cut is imminent and points out that Vanguard has a good distribution coverage ratio and leverage position

Now What: The concern is more when

2017 rolls around, because that is when the company’s oil and gas hedges roll off

Key takeaway: Investors agree that a distribution suspension is just around the corner, especially after other upstream MLPs already eliminated their distributions this year

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