Love the stock action so far(leaks?), we may see a blowout Q2
and 53 to 55 stock next week, IMO.
CSX and NSC are ARLP rail transportation companies. CSX reported
Coal volumes rose to 330,000 units in Q2 2014 from 310,000 units in Q2
2013, a year-on-year increase of 6% due to higher shipments of domestic
coal and utilities replenishing stockpiles, and NSC reports next WED. If
we assume ARLP's volume also increases 6% from last year Q2 which
means 9.817X1.06=10.41 MT for 2014 Q2, let's see if NSC also has 6%
increase coal volume next week, I may be wrong, that is how I estimate
ARLP Q2 numbers.
Q1 statement: Shipment delays also pushed total coal inventory higher to approximately 1.1 million tons, an increase of approximately 759,000 during the 2014 Quarter.
The 1.1 million tone inventory is more than enough to cover the production impacted
by the long wall move, the transportation is the factor limiting ARLP sales, and I have to
believe Q2 is much better than Q1, IMO.
I'd love those numbers, but I think you're a quarter or 2 early. On the last call, management said that Q2 would be impacted (negatively) by a Tunnel Ridge long wall move in May and a long wall move at Mettiki in April. They also reminded everyone that the Annual Miners' Vacation is in June and July and that would affect Q2 as well. I think they were pushing their increased 2014 guidance more towards the second half of the year. Certainly there has to be some catch-up for the slow Q1, but I don't think I get to your numbers. I like them, though.
And yes, unless you believe FELP's growth prospects and its ability to sell the increased production, FELP is way overvalued compared to ARLP. I own both, but FELP isn't a long-term holding for me. FELP is trying to sell its immediate growth prospects, while ARLP's growth seems more in 2015 and 2016 when Gibson South and White Oak come into full production. The catch-up at White Oak once full production starts will be a tremendous pick-up at ARLP's level. It gets all sorts of preferred returns once production starts in full.
There was a press release today from Bloomberg that said "Hungry U.S. Power Plant Turns to Russia for Coal Shipment". The body of the article said "When New Hampshire's largest utility needed to rebuild coal supplies after the past frigid winter, it turned to Russia rather than Appalachia in the U.S. Northeast or Wyoming's Powder River Basin.
The Doric Victory, a bulk carrier the length of two football fields, transported the fuel almost 4,000 miles (6,436 kilometers) from Riga, Latvia, last month to Public Service of New Hampshire's Schiller power plant in Portsmouth, a 150-megawatt facility that's produced electricity since 1952."
Perhaps someone should mention to Bloomberg that Latvia is no longer part of Russia. Of course it could be that Riga, Latvia was just a transit point.
The thermal coal market is certainly strengthening, but imports have nothing to do with it. And the US doesn’t seem to import any coal at all from Russia.
Per the EIA, the US imported a grand total of 3,380 tons thru April of this year (latest data available), compared to 2,101 tons same period last year, for an increase of 60%. For comparison, total US production during the 4-month period was about 325,000 tons, so imports were about 1% of the total.
And almost all of our coal imports come from Colombia, Indonesia and a bit from Canada. The EIA doesn’t even show any coal imported from Russia in the past 3 years, unless Russia takes over the Ukraine, which does import a trickle of coal to the US. I can't figure out the logistics of that one.
It's not a question of clean coal; the CAPP produces the "cleanest" coal in the US and it's dying. With the widespread use of scrubbers, clean coal isn't needed - even clean coal needs to be scrubbed, and that favors the use of the cheapest coal (Illinois Basin), not the cleanest coal. Obviously, this is good for ARLP.
For Q2, I see 10.25 MT coal sold, Total revenues $590M, earnings $1.2 and
Div 65 cents big up side. Compare ARLP to FELP, ARLP is too cheap, FELP
is estimated to produce 26 MT this year,and its Enterprise Value is $4.32B, ARLP
is only $4.17B, $55/share is fair value, IMO.
Utilities in the U.S. are scrambling for coal, on pace to increase imports 26% this year.
And indeed, as Bloomberg reports, US power plants are 'desperately' turning to Russia for their coal...
Utilities in the U.S. are scrambling for coal, on pace to increase imports 26 percent this year, as railroad bottlenecks slow deliveries and electricity demand climbs with an improving economy. Russia, the world’s third-largest exporter of the fuel, will boost shipments 3.9 percent to 106 million metric tons this year, IHS Energy forecasts, part of President Vladimir Putin’s plan to expand Russia’s role in the global coal market.
“Everyone’s aware that a number of plants have low stockpiles, so you hear Russian coal and they say, ‘Oh wow, people must really be desperate,’” James Stevenson, Houston-based director of North American coal at IHS, said in a July 8 telephone interview.
The Russian fuel appeals to power producers because it emits less sulfur than other coals, making it easier to comply with environmental rules, and has a high heat content, meaning it can produce more power per measure of fuel, Stevenson said.
“If you are on the Atlantic Coast, you have a chance to buy imported coal,” Stevenson said. “If you’re a utility you have to act now and throughout the second half of the year in case there’s a colder winter than last year.”
Expect some very big announcements this year.
BLGO is a strong buy.
Sentiment: Strong Buy
Since ARLP's business plan is to use excess DCF to fund organic growth, and since ARLP and AHGP are controlled by the same people, I doubt that any basic business model is going to change in the near future. I wouldn't want any accelerated Dist. in order to satisfy desire of short term investors for quick gains. At this point I can't afford to sell ARLP because of the tax problems it would create. So my plan is a stepped up basis to my heirs. I hope its a long term plan. As to using a faster growth of Dist. to fund other investments, ARLP is the best large investment I've ever had, and am fully satisfied in taking a Warren Buffet approach to it. Besides, organic growth funded by excess FCF is the best way to maximise long term dist., and since I don't care about the stock price going up, which won't do me any good, I'm happy with things as they are.
It aint broke. Management shouldn't try to fix it.
Actually, the modest proposal was meant as satire. Jonathan's Swift's original modest proposal, written during a time of hunger and poverty in Ireland, was to suggest that poor people should sell their children as food for rich people. His idea was to shame the wealthier people into doing something about poverty. It didn't work, by the way. Swift got famous, but the poor people didn't get anything. So I wasn't really serious.
But the more I think of it, I think maximizing the distribution would benefit ARLP as well. All investors care about these days is yield, and to a lesser extent, growth in that yield. So if ARLP were to maximize the yield, even at the cost of hurting/destroying the balance sheet, I think the higher distribution would result in a higher price. Take a look at FELP, which went public a few weeks ago with $ 1.4 billion in debt and zero capital, post the IPO. It's also in coal, and people ignore the ugly balance sheet and just focus on the DCF and promised distribution growth.
And I think ARLP (and FELP, for that matter) will be fine for the next few years with the focus on Illinois Basin thermal coal. NRP had 2 problems, 1 of which will eventually solve itself. First, it spent a lot of money, probably over $ 1 billion at this point, on coal reserves in Central App, which is not the place to be for thermal coal. That problem can't be fixed. CAPP thermal coal will essentially be gone within 5 years. And NRP made a big bet on met coal reserves (partly overlaps with the CAPP issue), which should eventually work out, but right now is in the tank. So, because its basic business had these problems, it had to diversify, but it waited way too long. ARLP doesn't have the same urgency, so I'd rather get a higher distribution and use the money to buy oil & gas MLPs on my own.
I think your suggestion would tend to limit price appreciation in ARLP stock. Since AHGP's only asset is ARLP securities, wouldn't that restrict AHGP's asset growth? AHGP's primary interest is in seeing their investment grow in value.
Another point: ARLP mgmt. is great at increasing value of its coal assets, but the industry may ultimately be limited due to forces beyond its control. With its substantial excess DCF, I think ARLP should look for other energy related investments, ala NRP.
My calculations of AHGP’s IDRs show that AHGP should be able to grow its distribution almost exactly 26% faster than ARLP for the next year or 2. So if ARLP raises its distribution by 10%, AHGP’s distribution should grow by 12.6%; if ARLP raises its distribution by 50%, AHGP’s distribution increases 63%, and so forth. While this sounds good for an investor in AHGP, it’s actually much slower growth than most other GP’s that are in the 50/50 splits. Unless ARLP issues more units (which is extremely unlikely), the 26% distribution outperformance is it for the near future. Eventually, as the distribution grows, the relative outperformance by AHGP will shrink.
The reason for the slowing growth at AHGP is that it actually runs ARLP to the benefit of ARLP, not simply for its own benefit. Most GPs follow the KMI/KMP model – maximize current distributions (with the GP getting 50% IDRs), which forces the MLP to regularly issue new units to finance growth. These new units already carry 50% IDRs, so the GPs benefit both from the growth in the business and the growth in common units outstanding.
AHGP/ARLP has done the opposite. It is the only MLP I know of that regularly distributes less than earnings, DCF or EBITDA or whatever measure of profitability you might choose. So AHGP is not benefitting from the IDR payments it could receive if it forced ARLP to distribute a higher portion of DCF/EBITDA/whatever. Because this accumulation of income at ARLP helps it to finance growth internally, there is less need to issue new units. In fact, ARLP has not issued any significant amount of new units in years (maybe never), so there is no growth in the IDRs on that score. From 2007 until currently, ARLP has increased common units outstanding by only 1%.
So here’s my modest proposal, with apologies to Jonathan Swift: as the GP, AHGP should force ARLP to start distributing 100% of its DCF. In fact, maybe ARLP should make a 1-time current distribution of all the accumulated earnings it has invested in the business over the past few years. Then ARLP should follow that with an equity raise to replenish capital. And finally, ARLP should start buying/building new mines (in the Illinois Basin, of course) and finance that growth 50-50 debt and equity, but especially equity. Then, having established a good track record of maximizing the IDRs, AHGP should sell itself to ETE, WMB or maybe KMI.
Biolargo’s “AOS Filter” is advanced technology that was recently validated a second time in proof of concept testing at the University of Alberta. It was shown effective at dismantling recalcitrant contaminants (napthenes 1,4 dioxane, etc) in seconds versus hours, and, at 1/20th the power consumption of the nearest competitor, making it the most cost-effective technology in just about every water industry segment.
AOS is not just a filter. AOS is not just a chemical reaction. AOS is not just an electrical reaction. AOS Filter is an electro-chemical reactor using advanced filtration to decontaminate water and make it safe and usable.
Enter symbol BLGO on Yahoo Finance “Stock Symbol” box to see full news release
“AOS Filter” will soon make it possible to increase oil sands and fracking production because it solves the wastewater problems with ultra high speed and ultra low cost.
The “AOS Filter” will also dramatically upgrade all municipal water systems, as well as clean the toxic wastewater from agriculture, mining and industry. AOS is a major breakthrough in clean water technology and is expected to be commercial within 12 months.
AOS can save permitting time in mining because it will eliminate toxic tailings and wastewater ponds.
Recent charts of BioLargo (BLGO) shares demonstrate a breakout driven by early investor discovery. Shares appear to be highly undervalued and a long-term hold for outstanding appreciation.
Sentiment: Strong Buy
Trust me I'm with you on that statement, just look what Odumacare is doing, using the insurance companies to redistribute money from those that can pay (us middle class) to those that get everything for free.
The stupid part about it is they all got free healthcare before Odumacare; its called Medicaid (Medicaid is for the so called poor).
Also now the people on Medicare (people who have paid in) it will also get hurt and pay more.
As I said the worst President ever, bar none.
Sentiment: Strong Buy
Unfortunately, you and many others miss the point. It's not about clean air. It IS about the redistribution of wealth.