It's really good to note that EPD will start exporting ethane next week from its new terminal on the Houston Ship Channel..The terminal has a capacity of more than 200,000 barrels/day , and is expected to be running at 60,000 barrels/day by December. EPD Has an ethane pipeline from Corpus Christi to Houston among its ethane gathering pipelines...so , hopefully SXE will be participating in this opportunity. THe big use for ethane is in ethylene production. ANd in 2017 ethane demand in the Houston area will be ramping up to 500,000 barrels/ day because of the new ethane steam crackers coming on line....SXE should be in much better shape a year from now.
plains All American (PAA) has just announced its merger with its General Partner. This follows similar moves by Crestwood and Targa. So, can SXE and Holdings be far behind? I suspect we will see a merger rather soon so the principals can score big as business picks up as we all know it will.
With Hillary getting a pass on the e-mails the odds on her being President and continuing to kill coal are excellent...and unless she kills Fracking,too, there is today so much extra natural gas around that thermal coal is zip...and I disagree on steel...there is so much extra capacity in the world even outside China that USA steel mills once closed aren't coming back..I suggest that NRP get completely out of Eastern Coal and simply make whatever it can in the Illinois fields...Wyoming expects to lose 10,000 coal mining jobs soon from the open pit mines out there...so coal's future is bleak...NRP should expand in aggregates,hold on too the soda ash, and see if there is anything else worth buying...perhaps a few pot farms or something..this whole thing reminds me of Pan Am..it sold off its Asian routes,the South American routes, it's servicing biz, and the PanAm building to save its money losing European routes..Chapter 11 followed. If coal shows any uptick, NRP should IMO take what it can get and move on.
The most amusing thing about natural gas replacing nuclear is that for decades the environmentalists have been trying to kill nuclear...however, natural gas fired generators have CO2 emissions, nukes don't...so, what is a good environmentalist supposed to do? Kill nukes and increase emissions? Subsidize hikes to keep emissions down? Let us laugh!
Thanks again for the excellent information..your contributions here are excellent. It is interesting to see the move to natural gas in Texas. It wasn't too long ago that Texas brought online a humongous amount of coal fired electrical generating capacity. That said, I agree with you that natural gas' prospects are far brighter than oil's. And if SXE can hang in for two more years it should do very well.
Exports of USA natural gas to Mexico are ramping up quickly. mexico has little natural gas supplies or infrastructure of its own..in fact, Mexico has been importing LNG at high expense some even from Australia. In 2010 USA exports of natural gas to Mexico were only 0.5Billion cu ft/day. Last year it was already above 3 Billion co ft/day. With some 15 new pipeline projects underway linking USA gas fields/processors to Mexico exports to Mexico should soar. That Eagle Ford natural gas is being piped all the way to the Mexico City area speaks volumes. SXE is IMO extraordinarily well positioned.for this upsurge.
Oil ,natural gas liquids, natural gas, and the fractionation spread were all up in the Q2 period..some additional rigs are operating in the Eagle Ford shale...so, you should be able to assume that SXE had a good Q2. And very shortly, the 200,000 barrel/day EPD ethane export terminal in the Houston area will be commissioned ramping up ethane demand in the Gulf area. All of this should help disperse the black clouds hovering over thThe SXE Enterprise because of the Holdings Chapter 11 proceedings. IMO once there is a market perception that SXE's operations are stable, the $3 level should be achieved quickly.
Sure, it benefits SXE. SXE's primary business is fractionation or separating out natural gas liquids like ethane,propane,butane etc from the primary natural gas methane stream that goes into pipelines. So, more gas going to Mexico means more fractionation business for SXE. Also, during this Q the big EPD ethane export terminal goes on line in the Houston area...and there is an ethane collection pipeline from Corpus Christi to that terminal in place already. SXE should be benefitting from that,too.
Thanks for the excellent data. I appreciate your continual efforts to provide timely information. This is kind of a "Good News, Bad News" Report. Declining production and a lower rig count is the "Bad News". The "Good News" is that declining production is bringing oil production into balance with market demand thus raising prices..and if you look at the Henry Hub Futures for natural gas you will see that futures for this coming winter are now above $3 up from just below $2 within the past year. Add in the big jump in ethane demand next year to feed Gulf Coast crackers producing ethylene and you have the elements in place to drive an increase in Eagle Ford production. As far as SXE goes it is in my opinion unlikely that any SXE competitor will be spending any CAPEX on new facilities,either. So, realize that a demand wave is forming that should lift all fractionator surfboards including SXE's.
Cheniere has also shipped a ship load of LNG to Brazil. And the expanded Panama Canal just opened this week expecting that a full 20% of its future ship transit business will be LNG shipments to Asia from the USA. The old Panama Canal had locks too small for almost all of the massive LNG ships in use today. The expanded canal can handle 80+% of LNG ships. By 2020 the world's three largest suppliers of LNG will be Qatar,the USA, and Australia...and interestingly enough LNG with low levels of ethane is preferred. Removing ethane and other natural gas liquids from natural gas is what SXE's fractionators do....
Nobody in Europe is as ignorant and stupid like the Democrat politicians and yourself to even think about banning fracked gas from the USA. The alternative is being totally dependent on Russia for 50% of the natural gas used in Europr, a doubling plus of natural gas prices there,and a destruction of the European plastics industry. Fracking in America is unleashing oceans of natural gas liquids like ethane,propane,and butane which are already being exported to Europe for plastics feedstock from MARCUS Hook on the DELAWARE River, Hampton Roads, and the Houston Ship Channel. Berne Sanders has banning fracking in his platform, Hillary is rabidly against it , and Obama has banned fracking from public lands...and without fracking these days natural gas prices in the USA would triple at a minimum, and gas for vehicles would be over $4/gal nationwide. Europe has already saved over a $trillion in the past five years because of Fracking's Impact just like the USA has. Any European politician dumb enough to run on a platform of banning fracked products in Europe today would be crushed at the ballot box. There. Is already 400,000 barrels/day of fracked propane going to Asia, too,and the Panama Canal expects 20% of its future traffic to be fracked LNG heading to Asia. It wasn't long ago we were shoveling out $1Billion/day for imported energy..thanks to fracking the USA is moving to a plus $ position in energy imports/exports...and neither solar nor wind power can produce plastics like fracked natural gas liquids can. Go back to your cave.
You are absolutely correct. The lead Merrill Lynch MLP analyst, Gabe Moreen, is,think I , afraid to put anymore leading opinions out there because he has screwed up a lot of predictions he made and missed other big moves completely. I told my Merryl advisor that Merrill should fire him for incompetence. He has also tried to cover up some of his more blatant errors. I have zero confidence in his opinions.
You are asking an excellent Q IMO.with the prospects rising for both the natural gas SXE collects and the natural gas liquids SXE produces from fractionation there is no good reason IMO for the unit price falling except through manipulation...I do wonder whether we are going to see a takeover bid in the next few months priced at $3/unit or so with thee press release blaring that , "Unit Holders are being offered a 50% premium !" At that price buyers would IMO be getting a steal just in time for the big business coming in 2017-2018.
The bottom line this that any gas producer in the Eagle Ford Shale gets a lot of extra money from selling natural gas liquids like ethane,propane,butane etc extracted from the "wet" gas by fractionators like SXE. So, with a lot of natural gas going to Cheniere for export and even more going into pipelines to Mexico SXE has the opportunity to fill its fractionators to the brim. And it gets better. The USA's biggest ethane,propane, and butane exporters are EPD and Targa in nearby Houston and Gulf Coast "crackers" producing ethylene are ramping up the use of SXE produced ethane as a raw material. Sure, SXE is smaller than most of its competitors. However, there is so much action shaping up that even minnows should score,too.
I recognize that a) all sorts of financial maneuvering so are going on involving Holdings and SXE and b) there is a massive, really massive market opportunity coming near term that should benefit SXE in a very big way....that said, SXE does have a Board of Directors that has a fiduciary duty to do the best possible performance it can do on behalf of the unit holders it represents. And IMO this includes keeping dilution to the bare minimum, insuring that any "cures" are solidly financially beneficial to unit holders, and expenses and staff minimized going forward.. I believe that SXE has the potential to be a $10+/unit MLP in 2018, and I submit the SXE's BOD should be focused on that as well.
Nice information! Let's add that last fall Cheniere signed a five year contract with Engie of France covering 12 shiploads of LNG/year starting in 2018 from the Cheniere LNG terminal being constructed in Corpus Christi. Cheniere has also signed a contract with EDF of France for 50 shiploads/year of LNG to be shipped from Sabine Pass. negotiations area underway with Baltic countries,too. Let's add that with the expansion of the Panama Canal opening this week the Panama Canal is now able to take the large LNG carriers and expects 20% of its future business to be LNG carriers going from the USA to Asia. Bottom line: SXE should be maxed out two years from now.
a more important factor than number of drilling rigs is the actual price of oil and natural gas. The low price of natural gas in the last year was just under $2/1mmBTUs at $1.94. Today it is at $2.62. Henry Hub futures are now around $3.20 for this coming winter...and this week four additional drilling rigs started up in the Eagle Ford Shale. Better technology simply means less costly wells..however you still need more the $3.50!natural gas to get the CAPEX flowing.in a big way.
You called it right IMO..but starting in Q3 things are going to get real interesting. Over in Houston EPD will be bringing on line its 200,000 barrel/day ethane export terminal...and the EPD Aegis ethane collection pipeline to Corpus is in place. And if you have been following the EIA Propane section you will see that propane demand is up this year thanks to EPDS/Targa exports from Houston,too. Since both ethane and propane are SXE fractionation products the SXE prospects should be brightening. In 2017 the ethane crackers being built along the Gulf Coast should come on line along with an ethane demand totaling 500,000 barrels/day...and this will be followed by more natural gas going to Mexico and two years from now the beginning export of LNG from Cheniere's Corpus Christi terminal...SXE should be running flat out by then...and, of course, the Panama Canal expansion is almost complete which means much bigger ships carrying more propane,butane etc will be heading to Asia....by this time next year we should all be singing at our local sports bars.
when you get the current High Heat/High Humidity conditions in the Mississippi Valley the power plants there will burn everything they can...and today it is natural gas that increasingly is used for peak demands..easy to turn natural gas generation on and off. Also important to note that Echelon is shutting down two massive nuclear plants in Illinois North of St Louis because they are no longer competitive with natural gas..there are 15 nuclear plants nationwide that are in danger economically because of natural gas...it will be interesting to see whether the Democrats/Environmentalists abandon their longstanding anti-nuclear position because burning natural gas does give off CO2 compared to nuclear's zero. Natural gas today is now number one in USAF power generation at about 33%...coal is about 30%, and nuclear about 20%. The TVA system around MEMPHIS about 40% nuclear. St Louis burns a lot of coal because next door to Illinois coal fields...but hard to increase rapidly power from coal fired plants. I went to Washington University in St Louis and suffered a lot in the summer when power outages hit.
IMO besides paying down debt, SXE and Holdings need to simplify theirvcorporate structure/relationship and like GEL,MMP,EPD, et al eliminate the IDRs. The problem MLPs get into is that setting up a GP-LP relationship is kind of incestuous. Holders of the GP equity are normally concentrated and through their control of the LP side kind of make decisions that benefit the GP more than the LP. In the case of SXE the unit price is still down significantly compared to other MLPs because IMO of the debt loaded up to acquire a lot assets just before the oil crash..That Holdings went Chapter 11 suggests that there was a lot of maneuvering that might not have been in the best interests of the LP unit holders...so, as the market expands in the next 3 years SXE needs to present a solid balance sheet, upgraded debt ratings, and good financial dealings with existing customers to attract the new customers and expanded volumes needed to max facilities and profits, and restore distributions.