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OCI Partners LP Message Board

  • jrad52 jrad52 Nov 15, 2013 4:37 PM Flag

    First post

    Nothing to say. Just wanted to be the first to post. Hope OCIP's 1 facility runs better than PDH and the 1-refinery MLPs. I'm tired of unplanned shutdowns.

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    • is this another variable distribution that depends on some kind of spread

      • 1 Reply to irbbping
      • You got it. OCIP will distribute 100% of available cash each Q, whatever that amounts to.

        And natural gas makes up 75% of OCIP's variable cash expenses for production. And it only has 2 products, methanol (75%) and ammonia (25%). These are generic chemicals, not proprietary or specialty. So customers can buy the exact same chemicals from other suppliers. Sales depend on lowest price and availability. Which means lowest price wins.

        Sounds just like PDH, on the downside. It also sounds just like TNH, which until recently has been a great investment.

        There is confusing disclosure in the prospectus about all of this. First, the prices of methanol and ammonia do not exactly track the price of natural gas, because natural gas has many other uses. So, natural gas prices could rise, as they have recently, without methanol and ammonia prices rising similarly. I'm sure you could track the price of methanol, but I have no idea where. And ammonia prices have been falling in recent quarters because of weakness in the agricultural area. I think OCIP sells substantially all of its ammonia production to RNF, a fertilizer MLP whose price recently has been fertilizer. Anyway, OCIP says a $ 1 change in the price of natural gas would change its profit by $ 32 MM, or 40 cents/unit. That sounds really low. My thought is that a $ 1 rise in natural gas prices is about a 25% - 33% rise. If natural gas makes up 75% of variable cash costs, I would have thought the impact would be much greater. But that's what they said.

        So yeah, variable distribution MLP whose profit depends on the relationship of natural gas prices to methanol/ammonia prices.

 
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