WSJ reported earlier this week that Bakken oil is selling at a $13 discount to WTI (largest discount since June 2012). Howard Weil refining report has WTI Chicago 2:1;1 crack spread at 19.99 as of Sept 25 . NTI uses their own trucks to transport Bakken to refiner for $3 a barrel. Do the math !
The Spread is spreading...up to $15 a barrel (3-2-1 WTI) this morn...thats up from a low of 11.30 just 10 days ago...too early to change any f-casts?....(Heating oil times 42 +gas times 42 times 2 minus WTI times 3 divided by 3..right?)
"In their "US Independent Refiners" report this morning, Credit Suisse cut their target on ALDW from $20 to $18, but maintained CLMT at $31 and NTI at $29. "
The price target is for 1 year out. According to the distribution forecast, by that time it is getting into the higher distribution amounts. Presumably that is why they have a higher target price even while forecasting low distributions for the next 3 quarters. They don't give shorter timeframe intermediate target prices but if they are correct, I'd guess we'd see lower unit prices before a rebound in 9 months or so once there is better visibility into the later higher distributions. So, for what it is worth, according to CS forecast, you can expect lower prices and low distributions for the next 3 quarters followed by a rebound in both distribution and prices by one year from now. In other words, you have a 6 month or more buying opportunity and may be able to pick up units are even lower prices for a later (not immediate) high yield. Of course, anything more than a few quarters out is much more uncertain so I'd put more weight on their forecast for the next 3 quarters than on the 3 quarters after that.
btw: I haven't seen the details of the report or the reasons for the sharp jump in distributions 4 quarters from now.
Liza, according to CS, the jump in NTI's projected future distribution is due to a projected future increase in WCS spreads. CS based this on an Enbridge presentation that stated that there is not enough pipe in the area.
If I read their report correctly, their model is based on a projected yield of 6% on the future distribution. I wonder if that is the correct yield to use since these variable MLPs seem to have traded at double digit yields even when crack spreads were at all-time highs.
FWIW, NTI is approaching the gap down at $23, setting up an opportunity to buy puts before the announcement of the cut in the distribution in early Nov.