The weakness in NGLs had the biggest impact on Equal this year, bottlenecks at Conway and a warm winter both conspired to sink prices, this is in addition to certain unplanned cracking capacity outages earlier this year. Follows is a good run down of the situation:
All kinds of deals are offered and closed for +40% over current pricing. The only salvation to a high personal cost basis here might be to add soon to average down. I'm at $4 and kicking myself for hanging on. The forward strips for NG and CL are not that comforting.
Figuring out the NGL futures pricing has been the hardest part for me in trying to model EQU's value. I am also a little unclear on what percentages of ethane, propane, butane, and natural gasoline they have in their mix. It makes a big difference in terms of how much their reserves are worth, so I have a pretty broad range of numbers I could see EQU's assets going for. I think in the current environment they will get offers close to their PDP reserves value using current strip prices and they won't get much credit for undeveloped land.
Indeed the pricing for NGLs has a significant impact on their valuation; there is quite a sharp contango in NGLs out of Conway in anticipation of the new take away capacity to MB, to be on the safe side I would use something like 38% of WTI as an average to model long term prices, instead of the historic 50%+.
Based on your current models, and what share price you think they will be taken out?.