We're finally back in range of the price before the last offering. Now, granted, over that time we had the whole LINE situation, and there's a big downward spike on the chart that can be directly tied to all that, but it's been a long hard slog. So, what now? This would seem like a good place for them to start thinking about pulling the trigger. They have about .1 EBITDA of debt room under their target, but that's a relatively small number, so any reasonably sized acquisition will no doubt be accompanied by an offering, despite the massive room they have on the borrowing line.
They seem to be having a difficult time find accretive opportunities, higher oil and gas prices are not helpful in that regard (and mean little to near term cash flow due to hedging). But, I wouldn't be completely shocked to see them raising capital, perhaps with another experimental foray into the preferred play, just to get set up, they've already shown they are not afraid to de-couple offerings from acquisitions. It's been a long seven months, but it's been even longer since the last acquisition. Maybe they'll be forced to dip into their reserves and really do that first bit of growth capex they've been talking about.
"Some of you may now think that we intend to issue the additional common units via secondary offering. That is currently not the case. We recently field a new prospectus for our aftermarket program or ATM program for short, which allows us to systematically sell units into the market which is a much more cost effective means to the company to raise equity capital and doesn't have the same disruptive impact to our [EBIT] price.
"The downside is that it does take time to raise a meaningful amount of money, and we will need to be patient and willing to live with slightly higher leverage than our three time debt to EBITDA goal for a period of time. That being said, if there are any institutions listening to this call that desire to buy large block of units under our ATM, please feel free to give me a call."
and the distribution accretion that the offering helped pay for has amounted to about 1% over that seven months, or about 0.06% on an annual basis while requiring substantial income to pay for the continuing additional distribution amount.
My guess is that acquisitions are going to be more expensive and tougher to land going forward...economy is getting better, oil pricing is firming worldwide, natural gas pricing is getting higher, and usage of natural gas in transportation and power generation is ramping up..and we are getting closer to the export of liquified natural gas...VNR is well positioned with previous acquisitions..but it may have JV with someone on the next big acquisition...working with NRP or BBEP would be interesting and perhaps profitable.
I've been buying and dripping distributions for over a year now. The almost 9% annual distributions companding monthly are IMHO a very good wealth builder for the patient investor. I believe management knows what they are doing and I've been going along for the ride. I think they have 10 to 20 years worth of projects to keep them cranking out the distributions. They will make a deal somewhere along the line so I am waiting. I think I'm pretty good at waiting. So eack month they give me another small bunch of units to pay me distributions on in addition to the ones I have now.