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?

While Eagle Rock’s acreage is dwarfed by Continental Resources, Inc. (NYSE:CLR)’s 232,000 net acres, it is a substantial position for a company of its size. These acres could potentially be monetized, or Eagle Rock could earn high rates of return in the 25%-30% range by investing its own capital to drill. The issue here though is that the company doesn’t have a whole lot of capital to work with, so selling the asset might be in its best interest.

In fact, a monetization of some sort seems fairly likely. On last quarter’s conference call, the company’s chairman, Joseph Mills, stated:

We’ve received several unsolicited inquiries, offers to purchase our position. And you can imagine, they come in all different forms, from outright trades to outright purchases of our acreage. … Historically, I’ve talked about the reserve potential here or resource potential could be in the, call it, 35 million to 55 million barrels oil equivalent for our acreage. … A lot of offers we’re getting are kind of per dollar, per acre, which are probably not something that we’re interested in. But we’ve had a few offers where they’re interested in trading us potentially proven — proved developed assets for this upside, and that’s kind of interesting to us given, in particular, our MLP structure.

Selling its SCOOP assets could potentially bring in additional assets of value or provide much needed cash to shore ups its balance sheet, which would put the company’s distribution on solid ground.

Final Foolish thoughts
Eagle Rock has built a solid reserve base from which it expects to produce for the next 13 years. In addition, there is compelling upside from its position in the SCOOP. Those ingredients are key for the company’s ability to maintain and possibly grow its already generous distribution. There is more to Eagle Rock: I’ve not yet touched on its midstream operations. Stay tuned to Fool.com for more on this side of its business.

The article Should You Scoop up This Energy Stock Before It Soars? originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of LINN Energy, LLC and has the following options: short October 2013 $25 puts on LINN Energy, LLC. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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.