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Crosstex Energy, Komandit ┼×irket Message Board

  • joefridaye joefridaye Mar 1, 2010 3:02 PM Flag

    Fundamentals suggest higher stock price

    I don't mean to be disrepectful to some of the posters on this board but there are people who made sell decisions without even listening to the conference call or looking at what is driving the price higher. I suppose it is the difference between trading and investing. The outlook is tremendously positive. Here are some key points, not in order of importance:

    * The DCF for 2010 does NOT represent the basis for future dividends since they are not planning on paying a dividend until Q4. DCF should improve and could be expected to be stronger in 2011, which is really the DCF number to be looking at (which they didn't provide guidance for).

    * During the Q&A it came out that the $.30 estimate for starting the dividend was not in fact the upper end of what they might pay as alluded to in the press release but rather the "CENTER" of the guidance. They are clearly being conservative with their wording in the PR.

    * Their cash flow is more predictable than ever with 80% of margin now coming from non-commodity price related sources vs. 70% in 2009.

    * They commissioned 3rd party studies of their assets in the Barnett and Haynseville, which confirmed they were optimally located for the greatest strategic value.

    * They see strong upside in the NGL business with limited additional investment.

    * They see very positive signs on drilling activity around their assets and the restarting of existing wells. Much of this has been publicly announced in the conference calls of public company customers.

    In summary, if you are trading the stock then it may or may not turn out to be good timing to take profits. If you are a long term investor, not trying to time the market, the last thing you want to do is sell. There is lots of upside here. I am expecting additional analyst upgrades and coverage over the next few months, if not weeks, as the data is digested and modeled.

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    • Short term may be hurt by the BP fiasco , but anyone that thinks the US should wean itself off oil should thank BP. The GOP can send young US men and women to war and deny global warning , all in the name of almighty oil , but they can't deny the gusher at the bottom of the ocean. This should jump start NG as the go to energy source in the US.

    • Sorry, but you forgot to mention that XTEX is a much smaller company than it was before. While it has less debt, it has a high interest rate on the debt it has, and if they use their LOC (line of credit) it will push the total interest expense up again.

      Distributable cash flow or adjusted cash flow, however you look at it, is roughly net income plus non-cash expenses minus capital expenditures (those things that aren't immediately expensed but are capitalized and depreciated--land is only capitalized, BTW.)

      If they have a positive cash flow, they should pay for capital expenditures out of the cash flow rather than using their LOC. Their depreciation and amortization expense are predictable, as is their interest expense. What is not predictable is income, especially the income from Barnett. I would like to see a source for your 80% number, since the last figure I heard was 68/32 for pipeline vs. processing, and after that not all of the pipeline is "tollgate" income. Some is based on volume.

      This stock is riding on the wave of hunger for dividends, which is a good bet until interest rates start to rise. Now that may be a good play as long as 18 months, but there is always the possibility that treasury rates will have to rise, which will push up other rates and therefore diminish the price of dividend-paying stocks, which will sell for less to produce a higher dividend rate.

      I have been impressed by the rise in the stock price (up to almost $11.50 intraday) and I'm kicking myself for selling out at $10.05. On the other hand, this stock has still got a long way to go to prove itself as an infestment.

    • I consider myself an investor (at least for Crosstex, I do "trade" other stocks). I also listened to the conference call and I still sold.

      Do I think the conf call was net-positive? Absolutely. The company is doing very well compared to where they were 6 months ago. My decision was based largely upon locking in large capital gains now (at 2010 tax rates) and parking my money somewhere safe (cash/gold) in the short-term.

      If there is a large correction, I plan to re-enter Crosstex.

    • The difference between an investment and a trade is distributions. XTEX is a trade now.

    • Thanks for the great info, I agree with all you said, but i am a investor and trader, I hope it goes higher, but i definetly think i will have a opportuniity to buy this back below ten, if not then i will pay higher, but i have a solid core position, and i will always trade half when there are big runs like this, there is no catalyst for this stock in the short term, and I want a .60 dividend of my own making, i may be wrong but who cares its only money, right , have a great day

    • I agree. Right now it's better to view XTEX as a growth stock that is going to pay a distribution in the future.