- DCP Midstream has performed well during the second quarter of 2021 after a weak start to the year from the freak Texas Winter storm.
- Whilst their operating cash flow remains weighed down by very large working capital movements, their underlying operating cash flow is recovering and management has increased their guidance.
- The bigger problem remains their very high leverage that is way higher than it seems when viewing the leverage ratio stated in their reports.
- This stems from their leverage ratio excluding $550m of debt and in my view, their $752m of preferred equity should also be included since it effectively acts like debt for their common unitholders.
- Following this analysis, I still believe that a bearish rating is appropriate with their unit price around a two-year high, making it a suitable time for investors to consider taking profits off the table.
For further details see:
DCP Midstream: Performing Well But Leverage Is Way Higher Than It Seems