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Linn Energy, LLC (LINE) Message Board

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  • yelyacs yelyacs Jan 24, 2013 9:47 PM Flag

    Is CVRR LP better than LINE LP???

    the crack spreads for CVRR's two refineries near Cushing are much lower than those of NTI's single refinery in Mn, looks to me. CVRR does use some bakken but NTI is much more a pure play on bakken-wti spreads. CVRR's crack spreads may be more insulated from wild swings than NTI's? although both are variable pay MLP's. The options market is signaling that the yield of NTI will be a fair bit less than CVRR's ~19% at today's prices, but NTI's first distribution yielded much more than 19%, and conditions have remained nearly as excellent this Q so there is a disconnect (arbitrage opportunity?) there. I've sold OTM puts on NTI and bought shares of CVRR. Today's news of the significant cash flow coming from CVRR into CVI is going to fuel the buzz around CVRR, which has seen an 18 million share day so far. CVRR insiders bough shares on the open market at $25. There could be solid upside for both NTI and CVRR, but CVRR's yield seems more visible

    I predict CVRR's share price will be more volatile than LINE's, given LINE's hedges and thus predictable payouts, as CVRR distributions will vary with crack spread and the price of refined products

    but even with an outlook for shrinking crack spreads though, CVRR could yield more than LINE for at least the medium if not long term

    there are lots of evolving conditions that will affect CVRR distribution- US production growth, new rail and pipeline infrastructure, the change in price of Brent (with interplay of saudi supply cuts, shrinking norther sea production, with expanded production in US/Canada/iraq etc)- so its yield should be high to compensate for risk

    that said, most of the MLP's etc. I have purchased recently with high yields (MMLP, QRE, NRP, PSEC) have all recently jumped in price, now a;; yield under 12%. Even many mreit's aren't yielding much above 12%. Is CVRR yield that much more levered to crack spread than mreit's are to interest spread, to warrant the higher risk premium?

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