Next Step for EVEP- A John Walker Financial Engineering Job
With no ability to monetize Marcellus. Darned if you do drill and have poor results and darned of you don't drill and cannot suck in another greater fool to pay something for........ well a future bet.....
Look for a dilutive transaction. Preferred or something that can provide some stability and/or funds to move forward on something. I am afraid that everyone who ignored the warning signs just got buried.
The lesson is NEVER invest in any MLP that is putting forward a speculation total return scenario. MLPs were not designed to be a high speculation play. If it turned out that a huge win by an MLP occurs that is fine but Walker has always sold his stuff as speculation. He should have set up a traditional corporation but he wanted to manage dropdowns to an entity so an MLP is designed perfectly for that transaction.
But take a look at every other E&P MLP. You NEVER see mgmt. talk about speculation as the basis for total return. Primary focus is to maintain and grow the income return which is difficult enough for an E&P MLP given all the moving parts that goes into income maintenance let alone any promise of consistent growth of income.
The existing Marcellus players have a lot of land to drill on so they have no interest in acquiring additional acreage in the near term. The foreign buyers that bought from CHK look like idiots having overpaid by a huge per acre multiple based upon CHK's last land sales.
EVEP holders are in such a negative feedback loop or death spiral or whatever you want to call it. Just like land speculators in Vegas you guys overstayed when you could have sold in the $60s or $50s or even $40s are looking real good right now.
i covered my short ytdy so close to flat for the year...not a fun way to scratch a trade...no new cash going to work here until hear news around their coverage/leverage but being short is getting tricky - actually think a "secondary" would bring a relief rally at this point and, if coupled with a small sale, could cause a big short-cover - anything but silence would be good....
There is not going to be any dilutive transaction. If there is a funding shortfall for EVEP to build out their midstream assets in the UTICA, Enervest could easily wave their IDR payments from EVEP similar to what the Williams Companies are doing. It is in the best interest of Enervest for EVEP to be successful and a secondary is not in the cards.
I believe u hve your geography convoluted,CABOT,RANGE , CHIEF, (ENERPLUS ) are doing quite well in the Marcellus in PA--500+/- PERMITS hve been applied 4 in OHIO in the PT PLEASANT / UTICA FORMATION.--@ $8 MIL a pop,--1 would like to believe some sane minds & insight is @ work here