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PetroLogistics LP Message Board

  • jrad52 jrad52 Apr 24, 2013 9:55 PM Flag

    Q1 and the 2 8-Ks

    PDH's earnings release is strange. I don't see any per share income number anywhere in the release. I know DCF is what matters, but the only time I can recall seeing a complete omission of EPS is in the Q when a company goes public. I would have ignored the EPS number, but it's strange not to see it.

    PDH disclosed the average cost of propane for the Q - 86 cents, lower than Q2's price, I think, so that's a headwind for Q2. PDH did not disclose the average price for PGP - I guess I could just divide the propylene sales by pounds sold, but I'm a little surprised not to see the components of the propane-propylene spread.

    But overall, Q1 looked pretty much like people were expecting; "people" basically being quantuon, that is. I was hopeful, but I don't know enough about the PGP pricing to be comfortable. With 67 cents for Q1, even a drop to 40 cents per Q for the rest of the year almost gets you to $ 1.75 for the year.

    PDH actually released 2 8-Ks this evening. 1 was for the earnings release, the other was the cancellation of the propane hedges. When PDH went public, it had a bunch of hedges against the price of propane going higher. PDH essentially shifted these hedges to its GP, so every Q, there are realized losses on the propane hedges (which go into EPS), offset by a reimbursement of the losses from the GP (which goes directly to capital). So the income statement reflects pretty substantial losses that are really being borne by the GP. So today, the parties announced a cancellation of the hedges - PDH will pay $ 34 million to the counterparty (reimbursed once again by the GP) and the hedges are gone. Considering how far the price of propane has dropped, I guess there was no value to keeping the hedges in place. Plus the accounting was screwy. PDH seems to get a $ 40 million deposit back from the counterparty. I don't see any disclosure that this money goes to the GP - it looks like PDH keeps it.

    Tomorrow's call should be interesting.