On Aug. 7, Leon Cooperman (Trades, Portfolio) added to his stake in Atlas Energy LLC (ATLS, Financial) buying 2.3 million shares of the stock to increase his total portfolio shares to 6.2 million. After the stock trade, Cooperman owns 24% of the company’s outstanding stock and his total portfolio position in the oil and gas sector increased to 14.74%.
Cooperman is the founder of hedge fund Omega Advisors. His hedge fund manages approximately $6 billion in equity assets. Cooperman is primarily a fundamental value investor. He also incorporates his macroeconomic market perspective with his fundamental analysis and is known to take large market bets on trending market valuations.
His bet on Atlas Energy comes at a low point for the oil and gas industry. In the sector, oil prices are currently at all-time lows. In trading on Aug. 12, the oil spot price per barrel for WTI crude oil was $43.22.
Atlas Energy, however, provides for an interesting investment opportunity within the oil and gas industry. As a master limited partnership it currently owns a portfolio of oil and gas companies. Its subsidiary companies include Atlas Resource Partners, LP (ARP, Financial), Atlas Growth Partners, LP and Lightfoot Capital Partners. All of the subsidiary companies of Atlas Energy are focused on businesses within the oil and gas sector.
As a master limited partnership, Atlas Energy has the capability under its operating structure to more easily buy and sell subsidiaries within the sector than its large conglomerate competitors. In the oil and gas industry, where acquisitions and divestitures have been increasing as companies struggle to grow revenue and manage exploratory expenses, Atlas Energy’s MLP structure helps to give it a competitive advantage.
In February 2015, Atlas Energy and its affiliate Atlas Pipeline completed a merger with Targa Resources that further built on the benefits of Atlas Energy’s MLP operating structure. Atlas Energy and Atlas Pipeline completed a combined merger of Targa Resources’ two publicly traded companies, Targa Resources Corp. (TRGP, Financial) and Targa Resources Partners (NGLS, Financial). Both the Targa Resources businesses are leading providers of midstream natural gas and natural gas liquid services in the United States. Following the completed merger on Feb. 27, the two Targa Resources businesses will begin to be integrated within Atlas Energy’s business lines.
On Aug. 6, Atlas Energy reported its second quarter earnings results with revenue of $98.3 million and loss per share of -$0.80 for the quarter. For the first half of the year, the company reported revenue of $344.1 million and loss per share of -$0.58. While second quarter revenue was down 31% from the comparable quarter, revenue for the first half of the year was up 13% reflecting the positive synergies from the merger of the Targa Resources businesses. While management did not disclose any further details about its Targa businesses in its second quarter earnings comments, it is clear that the integration of Targa Resources Corp. and Targa Resources Partners is contributing in a positive way to revenue for Atlas Energy.
Management’s overall focus in its second quarter earnings call was on the difficulties facing the oil and gas sector in the current environment. While lower oil prices have depressed earnings in the sector overall, management noted Atlas Energy’s ability to navigate adverse market factors through the use of its master limited partnership structure as well as its already in place long-term futures contracts.
Since the second quarter earnings announcement, the stock price of Atlas Energy has been increasing with a return of 63.17%. On Aug. 12, the stock price closed at $3.90.
Leon Cooperman (Trades, Portfolio)’s buy in on Aug. 7, the day after the earnings report announcement, signals his support for the company. In further support, Cooperman also bought shares of Targa Resources Corp. and Targa Resources Partners earlier in the year on March 31 following the completion of the merger. In the oil and gas sector, master limited partnerships are common. Other examples of large master limited partnerships in the industry include DCP Midstream Partners, LP. and Magellan Midstream Partners, LP. Master limited partnerships overall can provide an energy investment alternative to large conglomerates in the difficult energy industry environment.
