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Inergy, L.P. Message Board

  • moneyonomics moneyonomics Feb 3, 2012 11:04 AM Flag

    CS-storage fundamentals weak over the medium term

    combine that with propane issues so could be a tough couple years. in 2008 a few mlps actually stopped distributions to pay down debt the restarted later. not saying that is what nrgy will do just saying they possibly have a rough couple years ahead

    from passandshoot on iv mlp board

    02/03 Ratings/Target Price Changes Log
    Credit Suisse Lowers Price Target on Niska Gas Storage (NKA) from $12 to $9: Probability of a Distribution Cut is Increasing: NKA suggested that the current natural gas storage fundamental weakness is likely to persist for an extended period of time. Given that the company is not expecting a recovery anytime soon, NKA stated that its board of directors may consider a reduction or suspension in the distribution to common unitholders. In our view, this statement more explicitly opens the door to the possibility of a distribution cut. Were NKA to reduce its distribution it may be able to use the cash savings to accelerate debt reduction. However, important to note, any cut in the distribution to common unitholders would accrue arrearages. Our price target assumes the stock yields 15% and 0% distribution growth. At this juncture, we would suggest that the downside risk appears limited. Following NKA's $250mm goodwill write-down, we estimate NKA's tangible book value at $442mm or ~$6.50/unit. We are revising our 2012/2013 EPU estimates to ($2.37)/0.16 (from $0.36/($0.02). Furthermore, NKA is currently trading below $6,000 per Bcf, below the cost to develop most new capacity. That said, natural gas storage fundamentals are not expected to recover over the medium term, which remains a cause for concern

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    • Of course, they are ignoring the huge potential use of ng as
      sourse for the production of plastics,liquid fuel and many other things.

      • 1 Reply to norbertdt
      • norb, liquids from wet gas processing generally go directly to end user by pipe or rail and some stored at processing site. some may also be stored by an intermediary like you may be thinking but article is talking mainly about dry gas storage where rates are way way down as storage usually make money off of spread and spread is very small. i think that is why nrgy mentioned some issues at texas storage in press release

        " Market conditions, ...and to a lesser extent in the Texas gas storage market, remain challenging"