I just read the transcript, including the Q&A. Management certainly tempered expectations but I also added up $2-5 MM of incremental cash next quarter. Management also knows the importance of growing the dividend each quarter. My guess is the distribution will be $0.58 - $0.60 in 4Q. This time next year, given the new capacity, we should see another spike in distributions but with the full 50% sharing with the GP under the IDR placing a brake on the spike. Very bullish story for the Atlas trio of companies!
I would swap my APL shares for ATLS shares at this point (I only own ATLS). ATLS IDR's will be 100% in the money as soon as this 4Q given the strength of APL's cash flow. ATLS distribution will probably rise from $0.24 to $0.27 in 4Q and then ramp to $0.35-0.40 given the timing of payments from APL to ATLS. ATLS is currently covering it's distribution by 1.6X. I believe they are going to use some of this excess when it spins off 20% of E&P business into a new MLP. (The IDR's ATLS will own with new MLP are structured almost exactly the same as APL - IDR kicks in at $0.45 distribution per quarter). Once ATLS becomes a pure play IDR GP MLP play, it will be able to distribute nearly all it's DCF. Given the leverage to the IDR's, it should trade at a premium to APL, perhaps down to a yield of 4%........like where it is trading right now. Lastly, I think ATLS will create value for ATLS unit holders with 20% spin out of E&P business - it will quickly cover the ex-dividend gap of spin-off as it takes it DCF coverage down from 1.6X to something closer to 1.1X. You have the potential for 1 + 1 = 2.5.
So, by the 1Q one could have a $1.60 annualized distribution for ATLS, and if it trades to a 4% yield, the units have upside to $40 over next 6 months. Furthermore, the GP of APL, ATLS, owns over 5 MM units of APL and the management of the GP (the Cohen clan), owns mostly ATLS units of around 800,000. You may not like them, but they are money makers, and I would want to own exactly what they do as this story evolves...
Perhaps the trade is to swap a portion of APL units for ATLS units. You can swap 1:1 and take some money out of the trade at same time given the dollar price difference while getting more upside per unit.
In any case, a very bullish story developing across the Atlas trio of companies......
Distributable cashflow of 1.21 would cover the payments to the GP also is why it seems low. Recent increase would have been split75/25 with GP. Earnings a little ahead of my optimistic estimates. Cashflow from West Texas LPG $784,000 for 50 days works out to 5.7 million per year. 5.7 is about 6.7% of 85 million so maybe a little over 3% return after cost of debt service. Great report overall and hedges in place to protect enough cashflow through next year makes me sleep well.
Earnings were over .95 per share and DCF could have been .70 per share even though the distribution is at .54. This is ahead of CIti's forecast of 2.25 to 2.50 per share in 2012. We should see close to 40 real soon.
The Company says in its release that it has distributable cash flow of coverage of 1.21, but distributable cash flow was $0.70 and the distribution is $0.54. Wouldn't this imply coverage of almost 1.30?
And it looks like most of the revenues associated with the new capital projects haven't even come on board yet.