Inergy LP, a propane supplier and natural-gas storage operator, fell the most since going public after saying it may cut distributions and is reviewing operations as mild weather reduces fuel demand.
Inergy declined 24 percent to close at $17.33 in New York, the biggest drop since the shares began trading on July 26, 2001.
Inergy’s distributable cash flow for 2011 only covered 68 percent of its distributions, the Kansas City, Missouri-based company said in a statement attached to a filing today. Market conditions in its propane business and gas-storage operations in Texas “remain challenging,” according to the statement.
Inergy’s propane sales have been hurt by the warm winter, Ethan Bellamy, an analyst at Robert W. Baird & Co. in Denver, said in an interview today. Companies often store gas during the summer and sell it in the winter at a profit, he said.
“That seasonal arbitrage has really been crushed” by the warm weather and an oversupply of gas, said Bellamy, who rates Inergy’s units “underperform” and owns none.
Inergy is cutting costs in its propane business and considering reducing distributions to a level that matches expected cash flow, according to the statement.
Inergy may see more cash flow from its pipeline business in 2012, Mark McCabe, an analyst with KDP Investment Advisors Inc., wrote in a note to clients yesterday. The weather will continue to impact Inergy’s propane business, which will account for 60 percent of its first-quarter earnings before interest, taxes, deductions and amortization, he said.
Raymond James & Associates Inc. cut Inergy’s rating to “underperform” from “market perform” today.