Following the Distribution announcements at ATLS, APL & ARP, several firms updated their models. Wells Fargo put out a detailed piece on ATLS calling for distributions in 2013 of $0.31 A, $0.41 E, $0.51 E & $0.61 E totaling $1.84 for 2013. The 3Q distribution of $0.51 will be capitalized at annualized rate of $2.04 and assuming a 3% yield, one gets a $66 unit price come this fall. Morgan Stanley put out a piece as well calling for a price in the $60s as well. These research reports make no mention of any steps ARP takes to monetize it's excess reserves which I think could be huge for ATLS. When ATLS spun-out ARP, it created 20% more value for ATLS unit holders over night. We could again see something similar from this financial engineering. Furthermore, I suspect we are on the lip of the cup of ARP executing it's strategy of making another acquisition. Put this all in a blender and I see a much higher unit price later this year........enjoy the ride!!
There are several GP MLPs trading sub 3%. There are virtually no operating pipeline or E&P MLPs trading below 3%. The GP MLPs deserve to trade at a premium as they have much higher distribution growth given their leverage to IDRs.....
I vote absolutely NO on financial engineering. There is no such thing as excess reserves. Those are just reserves that we will develop in the future to support distributions for many years. Lets forget about fancy dancy thing and focus on execution .
I'd remind people that this is the same crowd that hedged our way into almost bankrupting the company the last time they tried fancy financial engineering. When they got the fancy bet terribly wrong - and I mean it was the laughing stock of the industry wrong, we had to sell off two very solid systems just to stay afloat. NO MORE! Just drill and raise money through the drilling program and keep expanding year after year. If we can do a good acquisition (I'd prefer they stick to acretive acquisitions) thats fine. BUT NO MORE TRYING TO BE SMARTER THAN EVERYONE ELSE!!!!!
David, do you think the spin-off of ARP was a mistake? This spin-off has created substantial value for ATLS unit holders. There is no way that ARP can develop it's excess reserves responsibly - they have 17 years of drilling sites. I believe ATLS unit holders will benefit substantially by creating an entity that can exploit these reserves faster thereby bringing those potential cash flows forward. It is a form of de-risking for ARP & ATLS