Great quarter, no doubt about it. As with the other MLPs, a return to somewhat normal temperatures has really shown in the results. But it looks like they still added to the long term debt ($48 million) and collateralized short term debt ($42 million). As long as they can get away with increasing debt, the distribution is safe, but what will happen when the music stops?
Hello bric.blows3. I have the same concerns. A few questions:
1. Why must hey take on so much debt? Do they need the money for working capital?
2. Is the new debt is at a very low interest rate?
3. Is FGP is vulnerable to the free-falling cost of natural gas? With the promise of low natural gas prices forever in the USA, might new rural neighborhoods and towns invest in the infrastructure to support natural gas?
1.) Cash generated from operations is not sufficient to cover expenses AND fund the $0.50 distribution each quarter. The shortfall must be borrowed.
2.) Can't say for sure, but I do believe the weighted average interest rate has been falling. There may be a disclosure in their SEC filings that speaks to this.
3.) This is a risk, but investing in natural gas infrastructure is extremely expensive even as the price of gas has fallen. Many local gov'ts will not pay for it, but rather give individual homeowners the option to connect at their own expense, plus there is the cost to convert/buy new appliances etc.