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EV Energy Partners LP Message Board

  • rlp2451 rlp2451 Mar 13, 2013 8:53 PM Flag

    EVEP Should Sit on their Properties Until NGL Takeaways Are Constructed

    SA has a great article about WMB and BWP building the Bluegrass pipeline to transport that would provide producers with 200,000 bbl/d of mixed NGLs take-away capacity in Ohio, West Virginia and Pennsylvania. Capacity can be further increased to 400,000 bbl/d via additional liquids pumping capacity. (For reference, the three existing pipeline projects under development that are designed to provide the critically needed ethane transportation solutions to the region - the ATEX Express, Mariner West and Mariner East pipelines - have a combined takeaway capacity of 280,000 bbl/d).

    Operators have been severely constrained in their ability to place liquids-rich wells on production due to the absence of wet gas processing infrastructure and NGL takeaway capacity and have been forced to hold back their drilling activity. As a result, the development of the Utica and Liquids-rich Marcellus have essentially been on hold, with very few wells drilled relative to what one would expect given the massive potential of these two plays. In fact, the majority of wells drilled in the Utica have been sidelined: as of March 3, of ~250 wells drilled in the play, only 75 wells were producing, many on restricted rates, with another 155 wells essentially waiting on infrastructure.

    For the next two-three years, Marcellus and Utica producers will likely be forced to recover only the minimum amount of ethane in order for their residue gas to meet gas quality specifications.

    The proposed Bluegrass Pipeline joint venture would support Williams' midstream assets in the region, offer an attractive return and enable Williams to become the premier NGL infrastructure provider by economically linking the Utica and Marcellus region to petrochemical complexes on the Utica and Marcellus and, importantly, introduce an element of competition among transportation providers. The 2015 in-service date would be nothing short of amazing.

    EV is premature in selling it's properties, in my opinion.

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    • and how much more would they get and can they afford to wait?

      • 2 Replies to quantuon
      • artist_formerly_known_as_pooch artist_formerly_known_as_pooch Mar 14, 2013 8:29 AM Flag

        Come on cut the guy some slack, he finally gave up his Jeopardy ways and made a statement not in the form of a question ;-)

        a) waiting means they will need to do a secondary down here ( actually below here as waiting probably won't be popular with the street) as they indicated they were going to max out the revolver in anticipation of a sale

        b) waiting to sell also means waiting to raise the distribution as they don't have a lot of excess coverage to afford an increase

        c) waiting is the opportunity cost of $$ today that will immediately buy assets to be placed in service

        d) in order to do dropdowns, they need to go back to the MLP model of debt/equity to pay for the dropdown. Cost of equity, again, gets higher when you admit you are postponing AGAIN. (I actually think they should have been doing smaller deals all along instead of focusing entirely on Utica--but that window has now passed)

        e) They already are retaining 70k acres after the intitial 100k sale

        f) infrastructure isn't going to be built until the land is drillt . EVEP has no $$ heft to mount a major Utica drilling program.

        g) EVEP management would take an even greater competence/reputational hit if they market land for 18 months and then go Oooops!

        I'm not so much hung up on a land sale as I am hung up on what the land sale does for EVEP. It brings dropdowns. It brings immediate production. It drives increasing distributions. I liken it to owning a house and having to move for a job. You just can't bring yourself to sell your house at a "loss". But you forget that the house you buy on the other end is likely also being sold at a "loss". You wait for your housing price to recover, you likely will be paying a lot more for the house on the other end. (and you've had to forego job opportunities in between)

        I want to see EVEP start moving forward again.

      • That's the $64,000 question. I just think they could get a lot more. What's the rush? We've waited a year, what's another (or two)?)

 
EVEP
35.90+0.51(+1.44%)Apr 17 4:00 PMEDT

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