Memorial Production Partners: No More General Partner - $MEMP $MRD $RRC

By Albert Alfonso

It was rather odd when Memorial Production Partners (NASDAQ:MEMP) acquired its general partner “Memorial Production Partners GP LLC” for $0.75 million from Memorial Resource Development Corp. (NASDAQ:MRD) a few weeks ago. . . .

Memorial Resource Development gets bought out

On Monday, Range Resources (NYSE:RRC) announced that it would be acquiring MRD in a $4.4 billion merger. This deal is technically unrelated to MEMP - no changes to the economics. But, from its prior actions, it appears RRC simply did not want to have to deal with being the general partner of MEMP.

MLPs are complicated structures. While MEMP is one of the better-hedged names in its sector, this is not saying much. MEMP has a lot of debt and will be in trouble down the road in oil prices stay low. A general partner may be liable for an MLP’s debt if it fails. The largest two of its peers, by EV, were Breitburn (NASDAQ:BBEP) and Linn Energy (NASDAQ:LINE) (NASDAQ:LNCO), both are which are now in bankruptcy court.

In addition, general partners are responsible for the administration of the MLP’s asset base, but the MLPs do reimburse the costs. RRC, as a growth energy stock, is not used to handling the “mature” assets such as those owned by MEMP, which was basically where MRD jettisoned older assets.

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