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Linn Energy, LLC Message Board

  • rlp2451 rlp2451 Jan 4, 2013 1:41 PM Flag

    OT: NTI and ALDW Down Almost 10% in Two Days

    I saw no news why are they down so much? Did they get ahead of themselves? Will they go down further? What do the tea leaves say?

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    • norris said earlier the seaway pipe news and fears that the spreads may narrow.... agree w/ norris but think this is way over played and don't see spreads coming in to any real degree may present a buying op.... jmo but i'm backing it w/ an another buy today below current position avg.... like um for the distributions

    • Does that group of questions imply that you do not know?

      I wonder what would norris say about that?

      Maybe this (article) from today could help?

      "24% Dividend Yield From Pure Play On Crude Oil Spreads

      By Mike Thiessen - January 10, 2013| Tickers: MRO, NTI

      Mike is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

      Northern Tier Energy (NYSE:NTI) is a variable rate MLP with a refinery in St. Paul Park, MN. It can exploit the difference between WTI and “north of Cushing” crude, primarily from Bakken oil shale. There is little to no organic growth opportunities so owning the shares is a bullish play on Mid Continent (MidCon) refining margins. Earnings and cash flow move in step with these margins along with dividends.

      Northern Tier Energy was formerly part of Marathon Oil (NYSE:MRO). Marathon divested its 74,000 b/d St Paul Park, Minnesota refinery, related logistics and retail network, known as Super America, and a 17% stake in a pipeline to Northern Tier. The facilities are in good condition and require relatively low levels of maintenance capex. Along those lines, management recently announced a planned maintenance shutdown in 2013 would last 25 days, five days less then previously announced. Over the past seven years, the refinery has had a 96.9% mechanical availability.

      The outlook for MidCon refineries is strong and Northern is a play of discounted Bakken oil prices (49% of 2011 throughput) versus WTI. Currently, Bakken crude trades at about a $35 discount to WTI. Margins are likely to remain at high levels for the foreseeable future for MidCon refineries as a whole, Northern among them. Analysts believe it is unlikely pipeline capacity will keep pace with production levels from Bakken and Canadian oil sand. Rail is transporting a significant portion of incremental production from Bakken and will likely continue to. As a result, “North of Cushing” oil will remain at a discount to Brent and WTI. Northern Tier Energy gets 100% of its oil from these price advantaged regions.

      In the most recent quarter, Northern reported earnings of $1.88 per unit ($1.79 consensus estimate), EBITDA of $204.8 million ($198.9 consensus) and a quarterly distribution of $1.48 per unit ($1.23 consensus). A quick note, the CEO recently resigned effective immediately. Rodriguez, co-founder and CEO, left to pursue other opportunities following the successful IPO. Hank Kuchta, COO and co-founder, will take over at CEO. There are no alarm bells over this departure and it appears the company is in capable hands.

      This is a pure play of the bull case on MidCon, particularly Bakken, spreads, versus WTI. There is no other variable rate MLP currently in this market. The biggest risk is an event causing a shutdown at their only refinery and their primary asset, the St Paul Park refinery. The refinery does have a two tier system so the refinery would likely maintain a portion of product during an unexpected maintenance event. The other key risk is in the spread shrinking between “north of Cushing” and Brent/WTI over the coming years. For that to happen, transportation needs to improve significantly. Historically, pipeline projects come in behind schedule and have delays, not the reverse. Planned pipeline capacity would also need to increase from current expectations to absorb forecasted production levels a few years out.

      NTI is a nice investment vehicle to play expected changes in refinery spreads. Also, as with other MLP’s, there are tax advantages. The shares trade at $24 and unless expectations on profitability improve further, they are close to fair value. Fifty percent of distributions are tax deferred through 2015. That said, the dividend yield for NTI of over 10% versus a 2.4% average among refiners is attractive."

      • 1 Reply to sandonthebeach47
      • I started a small position in NTI (sold June 22.5 puts- decent premium) when it dipped under 24 a few days back (it touched its 50 day MA which has been support since it IPO'd at 14, and also hit the lower line of 2 SD linear regression fit of price, which has also been a decent indicator guiding buy/sell decisions so far)

        I imagine NTI is going to be a very volatile small cap, it is a variable payout MLP, and has only got the one refinery so unscheduled downtime will hit shares. and the crack spreads (which are awesome right now and should yield 20% near term- the quarterly distribution in November was 1.48) may fall if new pipelines relieve the supply glut from Bakken and Canada , which sells for a ~$35 discount to WTI now. The Motley Fool article from today (FWIW; LOL) maintains that expected pipeline expansions will not be enuf to keep up with increased supply production from Bakken and Canada, thus preserving the discount to WTI and thus the huge crackspreads enabling NTI to pay out big right now

        the NTI refinery is pretty nice too, it can refine sour or sweet or heavy or light crudes into all kinds of products that it sells locally. It also retails its gas at its own brand of retail stations, and owns a bakery that provides stuff to the gas stations. It has its own little niche serving the Mn/Wi markets

        that said, I would not be surprised to see some sever downside (to 20? lower?) at some point so I curre. Although I do note that Goldman Sachs recently came out very positive on NTI (although I think they like Holly Frontier, another midwest refiner that also benefits from nice crackspreads by refining Bakken/Canadian oil, better)

    • Still dropping. I guess Marie told me the truth.

      What do the tea leaves say?

      Meanwhile, has anyone looked at the tea leaves for EVEP lately?

      Picked up some QCOM earlier this AM. The crystal ball lady at the end of the street said S&P rates it at five stars.