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Two MLPs With Heavy Insider Buying


These two MLPs have been beaten down, but judging by significant buying among corporate insiders, they could finally be in turnaround mode.

But its distributable cash flow climbed 15% in the third quarter from the year-ago period. Management attributed that performance to its $1.2 billion acquisition of oil- and gas-producing properties in the liquids-rich Barnett Shale in early 2012.

That acquisition further diversified its asset base, and perhaps the possibility of additional acquisitions along those lines drove insider buying. The MLP is a disciplined acquirer, and has financed 60 percent of its $1.9 billion in transactions with equity and free cash flow since its initial public offering in late 2006.

In December 2012, management announced that it's currently negotiating with potential buyers of its Utica Shale acreage.

The company does hedge its commodity exposure, and it already has hedges in place for 83% of its 2013 production. So executives probably aren't betting on a near-term rise in natural gas prices, since the hedges mean the MLP would have limited exposure to such a move.

After enjoying staggering gains in 2009-11, EVEP fell 9.5% in 2012, and its units currently yield 5.1%.

Inergy LP's executives were also extremely active buyers over the past six months, accumulating enough units to increase insider holdings by 20%. Total inside ownership now stands at just over 20%.

The major catalyst for Inergy is the fact that it divested its retail propane business in early August and is now a pure-play midstream MLP. Inergy sold its propane operations to Suburban Propane Partners (NYSE:SPH) in a $1.8 billion deal. The propane business had weighed heavily on results, as the recent unseasonably warm winters caused a sharp drop in demand.

That dismal performance forced two distribution cuts in 2012, with the most recent payout down almost 60% year over year.

The MLP now handles natural gas storage, natural gas liquids (NGL) supply logistics and transportation. Inergy is also the general partner (GP) for Inergy Midstream LP (NYSE:NRGM).

Inergy's units fell almost 31% in 2011 and another 1% in 2012. Clearly, management must believe most of the damage has been done and the company's shift toward midstream operations puts it firmly in turnaround mode. But the units currently yield 9.1%, a sure sign that investors are still waiting to see if management's efforts prove successful.

This article by Ari Charney originally appeared on Investing Daily.

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