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Enron Mail |
LEHMAN BROTHERS INC.
Analyst: Richard Gross Telephone #: 212-526-3143 Headline: EOTT Energy Partners, L.P.: Downgrading to 2-Outperform Industry: Energy & Power Region: United States Today's Date: 07/07/00 Ticker: EOT Fiscal Year: 12/31 Price: 14.13 52wk Range: 19 - 11 Rank(New): 2 - Outperform Target(New): 16 Rank(Old): 1 - Buy Target(Old): 16.5 ---------------------------------------------------------------------------- - EPS 1999 2000 2001 %Change Act. Old New St.Est Old New St.Est 2000/2001 1Q 0.17 0.01 0.08A 0.08A - -E - -E 0.00E -53 - - 2Q 0.09 0.14E 0.14E 0.14E - -E - -E 0.00E 56 - - 3Q 0.02 0.16E 0.16E 0.16E - -E - -E 0.00E 700 - - 4Q 0.08 0.13E 0.13E 0.13E - -E - -E 0.00E 63 - - ---------------------------------------------------------------------------- - Yr. 0.36 0.50E 0.50E 0.56E 0.64E 0.64E 0.65E 39 28 P/E 28.3 22.1 ---------------------------------------------------------------------------- - MARKET DATA FINANCIAL SUMMARY Shares OutStanding (MM) 28.0 Revenue (B) 11.4 Mkt Capitalization (B) 0.4 Five-Year EPS CAGR - - % Dividend Yield 13.4 Return On Equity (2000) - - Convertible No Current Book Value - - Float - - Debt To Capital - - % Disclosure(s) A ---------------------------------------------------------------------------- - INVESTMENT HIGHLIGHTS : * We are downgrading EOTT Energy Partners to 2-Outperform from 1-Buy based in part on the reduced prospects for near-term acquisitions. We are also reducing our price target from $17 to $16, which is based on a cash distribution of $1.90 and a yield of 13.4%. * We are concerned about the lack of near-term acquisition prospects for EOTT, and the subsequent impact this will have on cash distribution coverage levels. EOTT's coverage level of total units is estimated at 75% for 2000 and 84% for 2001. * EOTT's unit price is already up 9.1% through 2Q00 versus the S&P 500 which is down 1.0% in the same period. We believe further unit appreciation will likely be inhibited until coverage levels improve. WE ARE DOWNGRADING EOTT ENERGY PARTNERS TO 2-OUTPERFORM FROM 1-BUYBASED IN PART ON THE REDUCED PROSPECTS FOR NEAR-TERM ACQUISITIONS. We are also reducing our price target to $16 from $17, which is based on a cash distribution of $1.90 and a yield of 13.4%. We are maintaining our earnings estimates for EOTT at $0.50 for 2000 and $0.64 for 2001. WE ARE CONCERNED ABOUT THE LACK OF NEAR-TERM ACQUISITION PROSPECTS FOR EOTT AND THE SUBSEQUENT IMPACT THIS HAS ON IMPROVING THE CASH DISTRIBUTION COVERAGE LEVELS. We estimate that the total unit coverage level will be 75% in 2000, increasing to 84% in 2001, assuming a cash distribution of $1.90 per unit. EOTT will need to boost its distributable cash level by approximately $14 million in order to reach the 100% coverage level for all units in 2000. Without making an acquisition, it is unlikely that EOTT will reach this coverage level before 2002. Furthermore, although an acquisition would be accretive in the long run, it would likely be dilutive to earnings and cash in the near-term. In the meantime, EOTT has coverage support from Enron through 2001. UNIT PRICE APPRECIATION IS LIKELY TO BE INHIBITED UNTIL COVERAGE LEVELS IMPROVE FURTHER EOTTs unit price has appreciated 9.1% through the end of 2Q00, as compared to the S&P 500, which is down 1.0% during the same time period. Including the cash distributions, EOTTs return has been close to 16% so far this year. ____________________________________________________________________________ __ ___________________________Company Description : - -EOTT is one of the largest independent crude oil gathering and marketing companies in North America. Crude is gathered from over 6,000 producers with ownership of over 40,000 wells. Common carrier and proprietary pipelines transport EOTT and third party crude to market over a network of over 8,200 miles of facilities. This network moves over 500,000 barrels per day. EOTT also operates a small gas processing plant and associated fractionation facilities to provide blending stock for upgrading heavier, less valued crudes gathered in California. Margaret A. Connerty (212-526-3896) - mconnerty@lehman.com ____________________________________________________________________________ __ ____________________________________________________ Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. This document is for information purposes only. We do not represent that this information is complete or accurate. All opinions are subject to change. The securities mentioned may not be eligible for sale in some states or countries. This document has been prepared by Lehman Brothers Inc., Members SIPC, on behalf of Lehman Brothers International (Europe), which is regulated by the SFA.
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