I'm going to ignore all the gross numbers, those are way over prior periods due to acquisitions, so the fact that everything is up is not news. I'm more interested in coverage, leverage, how capital raises are proceeding to cover the big gas acq.
- Still focusing on gas [I don't agree].
- Have ten years of PUD's in the acquisition, thus the new growth capex.
- Reserve life 19 years on the acquisition [good, it may take a long time for gas to re-price],
- Downtime due to weather in Permian Basin and the Rockies, lasted into January.
- Only $23M forecast for growth cap, pretty minor. Most maintenance capex also attributable to Pinedale. Double maintenance capex from 2013. [That's what happens when you focus on gas, takes more money to get a given dollar of revenues. Still, the bottom line cash flow is all that matters.]
- Bid on $6B in properties that they didn't win in 2013, very tight market.
- Said they had problems with oil differentials that can't be hedged.
- "Obviously this was not our best quarter". Differentials, weather. WTI declined, hedges picked that up. Differentials down $7 during the quarter, which they predicted in the q&a, but much worse than they thought. Much better pricing expected in 2014. No damage to properties due to shut-ins.
- No NGL hedging at the moment.
- Says they predicted 1.0X coverage for the year, so the .88 shouldn't have come as a surprise [which is a tad disingenuous, they didn't actually say that in the q&a].
- Holding off hedging out past 2017 on Pinedale, don't want to be over-hedged, because they don't control the drilling activity up there [yeah, and I don't like that]. Gas differentials can be hedged, one reason they like gas. 45% hedged 2017 [that seems okay to me, plenty of time to bump that].
- Still working on 2015, 2016 hedging.
- ATM ongoing, they expect to use that continually in the future [cool].
- Comfortable with 2014 coverage, regardless of prices.
- Noted again focus is on cash flow, not production.
- Distribution growth will come from acquisitions, growth capital will go to debt reduction, trying to be conservative as possible, leaving as much production in the ground as they can [which I love]. Budgeting for higher coverage for a coverage, but they don't want to get on the "treadmill" of spending growth capex to increase distributions, soaking up their reserves [fine].
- Wells expected in January were delayed a bit due to weather, doing fine.
- Wellhead hedging, certain areas where there's no market. Whereas gas can always be hedged [fair point]. Permian oil can be hedged.
- Happy with gas prices hedged forward, $4+ is plenty good.
- As pro-active with differentials as they can be, but there's not much they can do, the production in the areas affected is mature, no new infrastructure in place. Trying to get oil priced on a different index.
- Rest was about operations and such.
So, things look okay, the Q4 miss wasn't an issue in the big picture. I'm happy enough. Still my largest holding.