Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Eagle Rock Energy Partners, L.P. (EROC): Should You Scoop Up This Energy Stock Before It Soars?

Eagle Rock Energy Partners, L.P. (NASDAQ:EROC)I recently took a brief look at one of the more unique MLPs, Eagle Rock Energy Partners, L.P. (NASDAQ:EROC). What makes this company unique is that it’s a blend of both traditional midstream MLP assets and oil and gas production assets. Today, I want to take a closer look at those oil and gas production assets, which I think provide investors with a lot of upside potential.

Proven reserves = steady returns
Eagle Rock Energy Partners, L.P. (NASDAQ:EROC) had 350 billion cubic feet equivalent (Bcfe) of oil and gas reserves as of the end of last year. Those reserves are spread across five main operating areas:

Source: Eagle Rock Partners Investor Presentation

Two-thirds of the reserves are located in the midcontinent, which are well-known for holding great MLP-type assets that have long life and low decline. Peers like Linn Energy LLC (NASDAQ:LINE) and Vanguard Natural Resources, LLC (NASDAQ:VNR) each has a substantial presence in the midcontinent region. Eagle Rock Energy Partners, L.P. (NASDAQ:EROC)’s reserves there have a heavy natural gas component; gas is 64% of these reserves. However, Eagle Rock Energy Partners, L.P. (NASDAQ:EROC) has an exciting oil play in the region, which I’ll get to in a moment.

The rest of its assets are spread around Texas, Alabama, and Mississippi. These assets are primarily oil assets, and combined produce about 27.5 million cubic feet equivalent per day (MMcfe/d) of Eagle Rock Energy Partners, L.P. (NASDAQ:EROC)’s overall average production of 75.1 MMcfe/d. One particular area of interest is Eagle Rock Energy Partners, L.P. (NASDAQ:EROC)’s Permian Basin assets. Both Linn Energy LLC (NASDAQ:LINE) and Vanguard Natural Resources, LLC (NASDAQ:VNR) have invested heavily in the Permian over the past year, as the formation is an excellent MLP asset with low decline rates and long-life, liquids-rich production. The bottom line is that Eagle Rock’s oil and gas assets are focused in the same conventional areas as its peers because these are the type of low-decline, long-life assets that are critical to fueling the hefty distributions that these companies pay.

With a “SCOOP” of upside potential
The most interesting asset, and the one with the highest upside is Eagle Rock’s position in the “SCOOP”, or South Central Oklahoma Oil Province. Top Bakken producer Continental Resources, Inc. (NYSE:CLR) calls it a “new, high-impact resource play” and Eagle Rock has 16,000 net acres right in the heart of this play. The potential is there for this to be a play with high returns and, therefore, high upside for Eagle Rock. In fact, it has seen a 31% jump in production growth as its interest in nine horizontal wells have come on line.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.