What are your thoughts on the SeekingAlpha article that highlights Kinder, Markwest, etc as potentially understating maintenance CapEx on gathering systems?
I just checked MWE's cash flow statement and income statement. Their Cap Ex went from .5B last year to 2B this year, that is a 400% jump. KMI's was 1.7B last year and this year 2.1B. I got burned on LINE which I still own so I sold my KMI and MWE on Friday to play defensive until this this thing with Hedgeeye ends. MWE has run up in price this last year from 49 to over 70. I like MWE but will wait to see how things end up to get back in.
how can anyone come to a conclusion from the article that maintenance capital is understated?
I spent 25 years in the industry up thru a division controller, then in Strategic Planning and Business development for of the top 3 US majors and have been published and "I cannot come to the SA authors conclusions from the data presented in the article that maintenance is understated. On Linn for instance Deprecation/Depreciation/Depletion calculations in E&P are very complex and move with the price of oil gas as reserves move in that direction. When engineers lower reserves due to price then depreciation is adjusted up (and caught up) but when prices rise there is no recapture, and on and on; so based on the depreciation graphs trends absolutely no firm conclusion can be draw as the author speculated it could. On the other measures again unless you totally and completely understand and see their reserve modeling, etc you cannot possibly measure maintenance cost against reserves replacements or decline, etc.
The above for Line is also analogous for g&p's. Without seeing the flow projections/decline rates behind the reserves tied to the pipelines, the deterioration/wear rates of each type of pipe and plant component, no published data can possibly lead one to say conclusively maintenance capital is understated as presented in these typed of articles.
I did not respond to the article as the article.author must have an agenda in my view as again with all of my years of experience I could not come to any conclusion on adequacy on maintenance cost based on the data the author presented extracted from published financial statements, etc
Your $0 .5B capex figure from last year is incorrect. It was about $1.5B
I find it interesting that so far you are keeping LINE that you say you got burned on while selling MWE which is up from $49 to over $70 this year. Why do you keep a security you say you got burned on and sell one that has done well for you?
I have been investing in KMP for over 17 years. They are a conglomerate not a gathering company. Anyone that uses seekingalpha for anything except transcripts of conferences is a FOOL. That goes double for ZACKS another clueless group evaluating mlp's. LINE is another case and not a gathering or capex problem. As far as the other yoyo who put out their thoughts with nothing to show for it . Go back to LINE message board Norris is missing you and finally I will now nominate the YUTZ's for year who post mindless posts. (google YUTZ they are noun d-----s) or fool) MP Marv
I think it is an article by a guy with a point to prove rather than an analysis of the actual facts. An 80% well depletion rate is not universal since many old fields are redone and last for years. But the best answer is that , under the same circumstances as he posits, many fine MLPs have been paying out high dividends for years.
I think this is the worst kind of journalism,,pump out opinion without any analysis,numbers,nothing..and just tar various companies with innuendo and rumors...all the numbers are available if you want to spend months analyzing them. You think bankers would loan Kinder,MWE and the whole energy industry tens of billions of dollars if the underpinnings weren't solid??? It is like fracking. The politicians, the liberal press, the EPA are all desperately trying to kill fracking because of "environmental concerns". And yet despite tens of thousands of fracked wells No One can find yet any evidence that fracking is dangerous to the water supply. Now, MWE has been in this business for decades and makes tons of money..some of the areas that MWE operates in have been drilled in for a hundred plus years and are still producing..Pennsylvania is one of those areas. And so what if wells play out? You drill deeper from the same pad. You drill in other directions. It's routine. And by the way Kinder's main business is long pipelines, not gathering systems...and with pipe maintenance and even relocation being absurdly small compared to maintenance of processing facilities ( each 200 million cuft/ day cryo unit costs over $100 million) the author of this trash doesn't have a clue IMO.