I listened to the call. Participants emphasized that ETE would do what is necessary to held ETP maintain its distribution through mid 2017 at which time ETP's growth will be substantially higher based on new projects coming on line. They also stated they see no events in 2016 that would necessitate a cut in ETP distributions. They were fairly non-committal on the growth of this distribution in 2016, but I can live with a $4.22 annual double digit distribution for all of 2016.
Obviously, this clown did not listen to the conference call today. Just another shortie trying to work the oil patch!
KMI showed a temporary distribution cut for 2 years is the right thing to do in a down environment.
MLPs operate on the edge when times are good, this is the model, they are cash cows but pay out that cash. But when things turn down the capital markets freeze.
Taking two years to use that cash to de-lever and improve the balance sheet is rewarded by the market. KMI cut but are trading around where they were before the cut. The reason is because the market knows KMI will be able to fully restore the distribution, and increase it in 2 years time. That is what the market is valuing now.
ETE is in a bind though because a cut at ETP causes them to blow the covenants, but banks should be OK with this move as it de-risks the whole group.
The reason ETP is a great buy now is unlike KMI which cut 75%, ETP can not cut 75% because it would starve ETE, so ETP will probably cut 25% for 2 years and ETE 100% for 2 years. Both will be restored and then some in 2018.
What we are seeing is firms like EPD have the better model, they run at 1.3x coverage, not 1.0x, and are able to easily absorb downturns with no problem.
Credit Suisse thinks ETP will maintain its current distribution level but sees SXL and SUN raising their distribution growth at slower rates.
CEO at conf call: "There's no contemplated distribution cuts at ETP, whatsoever. We've not looked at any scenario where that would be appropriate or necessary. It's just not – we just don't see that."
... "And we're going to be taking moves to help ETP get to middle of 2017, which is all it needs. And then it's cooking in grease after that."
Of course there was that knee-jerk reaction to sell based on the earnings miss but this is an LP structured to MAXIMIZE DEPRECIATION and MINIMIZE EARNINGS to kick tax liability way down the road. Distributable Cash Flow has this 15%+ yield nice and safe. Any short who didn't cover this AM won't see such an opportunity again. Let the market start looking deeper into the #'s and it is going to like what it sees.
There are termination provision, but assuming WMB shareholders vote for the agreement and WMB did not materially fail to disclose adverse information to ETE, termination is difficult. The provision below which governs Material Adverse Effect is the key provision. Essentially what the provision says is that if the economy, industry pricing, interest rates, regulation or force majure events have a disproportionate effect on WMB when compared to others in the pipeline business a Material Adverse Effect, which would be the basis for ETE to terminate, may have occurred. I say may have occurred because this is a fact based question which would most likely be decided in Delaware Chancery Court. At this point, the only possible event that might give rise to a MAE would be a CHK bankruptcy filing. However, even that may not give rise to a MAE, if the trustee in Bankruptcy continues to operate CHK as normal utilizing WMB services.
The other way to terminate would be a negotiated settlement. However, WMB would likely demand a very significant termination fee to go that route. ETE would have to pay that fee and would walk away empty handed.
"; provided,however, that the changes, effects, events, occurrences, circumstances, developments or states of facts set forth in the foregoing clauses (i), (ii), (iii), (v), (vi) and (vii) shall be taken into account in determining whether a “Company Material Adverse Effect” has occurred to the extent such changes, effects, events, occurrences, circumstances, developments or states of facts have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, when compared to other participants in the industries in which the Company and its Subsidiaries operate."
So management just lied on the conference call this morning and you know more than they do?
In the conference call the answer to the direct question from Goldman Sachs Analyst as to whether cuts to distributions at ETP (and ETE) were coming was answered as follows for ETP: "...There are no contemplated distribution cuts at ETP whatsoever. We have not looked at any scenario where that would be appropriate or necessary, we just don't see that!"
This was not the tone of managements answer on a possible cut to the distributions at ETE which was disclosed as a "last bucket possibility" if required to maintain credit ratings.
So which piece of information do you have that management is withholding and lying about on conference calls...my guess is none and your comments are worth the price we all paid for them.
The pipeline hold the ultimate 4 ACEs.... the judge tears up the volume agreement... the pipe operator says great... Pay our new and higher un-contracted rate.... or let your Natty sit unsold at the production point... the judge cannot force a pipeline to ship at a price the judge determines
Then the judge scratches his balls and wonders how all the other creditors will see a dime of what he has allotted to them
Now pay attention... the Aces are that the pipeline basically operates a monopoly... which is a known fact which is why rates are FERC regulated... the key ( call it a quid pro quo) to an E&P getting the FERC rate is the volume commitment...
no volume commitment then Producer has to pay a spot rate whose sole discretion is up to the pipeline... the pipeline has to turn a profit so knowing the volumes are lower without the volume commitment... price of transportation soars
Who needs financing for CAPEX? Not ETP...did you look at the January distribution announcement or listen to yesterday's conference call? ETP will not need access to the Equity or Debt markets to fund CAPEX in 2016. ETE is a different story, but you are on the wrong board if you want to discuss ETE's future distribution rate.
down grade etp just the start of down grades, yep that is why David Tepper bought over 5 million shares because etp is junk, long term holder here
ETP would also jump to 2.2x coverage, have zero need to ever raise equity again, be able to fund massive growth and pay down debt which is already reasonable.
All on top of relatively secure assets with stable cash flows and massive growth already planned by 2017 with the next export capability.
The pricing today is reaching absurd levels. It is all due to fears related to the WMB purchase and CHK exposure that comes through that. ETE should kill the deal, pay the small penalty and move on.
I tried to grab the bottom of the mlp market. Thought i almost got it but im now negative. I know many are felling real pain tho...sorry.
Who is selling any mlp at 10-25% distributions? Who cares if they cut a divy to even 7% thats AWEsome tax deffered cashflow. Get a grip people...buckel the fk up
Mr Market is saying that a distribution cut is inevitable. Look at the performance of KMI since they eliminated the distribution. Kelcey can read the tea leaves. Time to focus on improving the balance sheet, especially with material new debt post WMB merger close.
Key line, "We believe the partnership’s distribution is secure and the 13.4% yield is attractive, but near term challenges may limit price appreciation."
These guys make absolutely no sense. If you actually believed the yield was secure, you would be buying hand over fist and putting it away.