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www.dow.com/investors/pdfs/presentations/Bernstein_FINAL.pdf"Propane to propylene spreads favorable and expected to widen." May 31st, 2012Go to section: Propylene integration enhances profitability.
another article from June 15th. It quotes the UBS analyst.http://www.istockanalyst.com/finance/story/5899542/petrologistics-a-good-name-in-us-shale-gas-play
According to the latest PDH release, the spread has contracted to $.30/lb, which, if continues, would result in DCF of around $1.13/unit on an annualized basis.So, you are still looking at a fat yield, but you are holding a commodity sensitive propylene producer.BTW, those numbers are available in PDH's S-1.
Spread will matter very little once all the crackers come online. Too much competition, in the long run. http://www.icis.com/Articles/2012/04/02/9546235/afpm-shale-gas-leads-to-mega-projects.html
The problem is that Dow is building, for certain, 1 large PDH facility and likely 2.EPD is building one as well. Competition is heating up. I think PDH has a good position, but they need more long term contracts and more of a fee based component to their business model.Risk reward on this one is compelling especially if the price keeps dropping. No doubt that this is risky, but at the right price, I would take the plunge.Would be a better fit within a larger MLP (ala the EPD approach). I could see Targa or Energy Transfer wanting to go this direction.
Wait, that's about ethylene, not propylene...