Endangered Dividends List

The next round of distribution declarations in our Energy and Income Advisor coverage universe isn’t for another month. But Sanchez Midstream Partners LP (NYSE: SNMP) is at elevated risk to announce a cut sooner, now that its parent and largest customer Sanchez Energy (OTC: SNEC) is for all practical purposes bankrupt.

Unfortunately, we continue to see elevated risk for a number of companies, and particularly for the 13 currently on our Endangered Dividends List. For more on where the risk lies at individual midstream energy companies and MLPs, see the comments column in our now updated MLP Ratings table, including analysis of first quarter results, distribution coverage and debt-to-EBITDA figures and prospects for potential roll-up mergers. It’s posted on the Energy and Income Advisor website under the “Portfolios” tab.

Foresight Energy LP (NYSE: FELP) is eliminating its quarterly distribution. That follows a poor first quarter during which the coal mining MLP experienced sharp increases in transportation costs because of flooding and “an accelerated decline in export prices” for its output.

Blueknight Energy Partners (NSDQ: BKEP) is cutting its quarterly distribution for the second time in a year, from 8 to 4 cents per unit. Unfortunately, even after that large of a reduction, the payout still isn’t safe. In fact, the consensus of analysts tracked by Bloomberg is the July distribution will be cut to just a penny a unit.

Amerigas Partners’ (NYSE: APU) merger terms with general partner UGI Corp (NYSE: UGI) imply a roughly 83 percent cut in the dividend when the deal closes. That eventuality has been known by investors for two weeks and is therefore baked into the price. Therefore, while we do advise moving on from Amerigas, the MLP is now off the Endangered Dividends List.

American Midstream Partners (NYSE: AMID) has received its likely best and final takeover offer from general partner ArcLight Capital Partners LLC. ArcLight last year bid $6.10 per share in cash for AMID units, before cutting it to $4.50 in the wake of disappointing operating results. The newly agreed on offer of $5.25 per unit in cash appears likely to win needed approvals and to close in coming weeks.

There have been no additional dividend cuts in our three coverage universes since the previous EIA issue. That’s largely a function of timing, as companies are winding up the calendar first quarter and won’t be declaring their next distributions until next month.

However, calendar fourth quarter reporting requires considerably more legal filings. That means it typically takes several weeks longer for many companies to compete filings than it does other times of the year. And the good news is several later reporters did come in with encouraging news and guidance.

Summit Midstream Partners LP (NYSE: SMLP) is cutting its quarterly payout in half from 57.5 cents to 28.75 cents. Management called the move a “repositioning” to “fund attractive growth opportunities and maintain a prudent capital structure.” The partnership also swapped its general partner’s IDRs for 8.75 million new common units, boosting outstanding shares by roughly 12 percent.

No companies on either the Endangered Dividends List or within our energy stock coverage universes have announced dividend cuts since the previous issue. That includes Sanchez Midstream Partners (NYSE: SNMP), which maintained its payout this month despite the apparent slide toward bankruptcy of its parent and leading customer Sanchez Energy Corp (NYSE: SN).

This dividend declaration season, five companies announced dividend distribution cuts. All operate in more leveraged sectors of the energy industry. The chief catalyst was the autumn retreat in benchmark oil prices, coupled with some extremely wide differences in regional pricing.