pj, you are right, the futures show $3.08 avg next year, could be $3.50. Fundamentals for gas look great and most of it comes from NE, Williams stronghold. Saw the other day since '11, NE gas is up from 6 to 24 bcf/d and rest of country is down a few bcf, and power generation, people are talking 30 bcf of add'l demand. Again, you can see why Warren wanted Transco and Williams g and p assets in the NE. Hamm, CLR, said now he thinks $70 oil by end of year. No one has a perfect crystal ball, but absent something unknown out of the ME, we could have a big under supply of oil next year. Good for NGLs and Williams. Also good for ETE. Good for all of the g and p cos. Have been buying TEGP because of their REX pipeline that will now ship gas from NE to west, initially set up for west to east flow, the 1.8 bcfd one way could be 6bcf/d bi directional flow.
PAGP will do well filling pipes with no capex. We just need this merger from hell to be put to rest. Neither co should want the deal.
From ETE board. The problem with journalists, reaching wrong conclusion. I view it as a good omen for WMB, Warren won't close. I really don't care about a couple of dollars of profit in a bad merger. ETE falls to $10 with dist elim and ETC is $9, WMB value is $22. The assets together make sense, Warren's control, the MLP form and the ETC vehicle, don't. WMB board should not want this deal except they have the two activists that have been scorched and want to make back a few short term dollars. IMHO, the WMB board has done a lousy job.
It was on Dow Jones Newswires. I was unable to copy and paste the article. The article said WMB was looking for evidence that ETE convinced their lawyers to issue that negative tax opinion. The article surmised that since ETE didn't fight turning over the requested info, ETE had nothing to hide and thus didn't influence their attorneys. The article said it could be a bad omen for WMB. Nothing negative was said about ETE.
Thanks. Seems that would boost ETE, must be that the FTC announcement which is irrelevant is driving ETE down. Probably a good day to buy ETE if you are convinced the deal is dead.
I never said that was the conclusion, I asked if someone saw the source so I could read it. You don't seem to understand my comments. ETE is down today imho because of the FTC approval. I'm not a lawyer and don't claim to be but a tax opinion is just that, an opinion. And Warren can refuse to close if his counsel doesn't give a tax opinion. Williams already said that the deal could be fixed to overcome the tax opinion issue so would assume they had the info before. Not very useful info, kind of like the article saying the break fee is paid with no vote.
Someone mentioned on ETE board that ETE shared with WMB tax opinion info that indicates opinion was not influenced by ETE. Does anyone have a source.
What's the source of the news you're talking about. The FTC approved merger with sale of Gulfstream, Couldn''t find what you are referring to.
Based on the ETE stock reaction, probably a good buy today for short term and long. You have to believe the deal dies.
Good example, since the FTC release, ETE is down 3% and WMB is up 2%, is the market right. The FTC approval is irrelevant but short term traders are trading on that news. And disposing of Gulfstream, that has been anticipated all along.
Here's my response
WMB has done nothing to cause the $1.5 billion fee to be paid.
I don't want the deal done at all.
2x equity imo would work, but the tax opinion issue is still there.
I think Warren can stand behind the tax opinion and not close.
I do think ETE should pay something before it gets to court, too risky to do otherwise.
And WMB should want to stay out of court.
Again, I have never said WMB should pay ETE anything. If anything ETE should pay something to kill deal. But I'm not sure how WMB has been damaged that much.
Again, I voted no and don't want the deal to close. And I believe WMB doesn't want to close either, they want some cash from Warren.
Scenarios, we settle before court decides with ETE paying a small amount. Or court rules that it should close with tax opinion. Or tax opinion issue remains and Warren refuses to close.
FTC arpproved the merger, thought they might force sale of Fla pipes. Probably why ETE is down and WMB up some. Again short term trades are not long term values. The deal never closes.
And when you get a disconnect between short term stock prices and long term values, if you get it right, you make a bunch of money. ETE and WMB are both undervalued. ETE was $4 a few months ago, the market's valuation and it's $14 now. Warren may want this deal with all equity and is posturing to get it done or not at all. Deal dies, WMB gives guidance, they are teed up to sell Canada, probably other assets. It's undervalue and time will tell. ETE goes up too.
There is no explanation for the short term moves in the market. If you get the valuation right and ride through the short term, you can do well. I may buy more WMB today, may be too good a value to pass up. Oil in the $70s next year along with #3 plus gas is going to put the e and p sector back into a growth mode.
I am not conflicted, if anything I would lean toward WMB, own 5x as much WMB, WPZ than ETE, ETP. I like both companies and will continue to own both after the deal dies. If if weren't for Warren, would buy more ETE and already own too much WMB, cost in low single digits. I'm sure "advice" is objective. And by the way, there is no break fee for WMB owners voting no.
Value and stock price are two diff things. There is still the fear that the deal will close and WMB has given no guidance, they could cut the div 25% or 75% or 5%. Another value calc is 13x $2.30 dcf, $30. ETE was trading for $4 not too long ago, that was the stock price and not the value. The arbs want to make a couple of dollars and the machinations of both sides trying to get out of the deal is affecting the price. It makes perfect sense. WMB is worth a bunch more than $23. This is a buy opp if you believe the deal is dead, so is ETE, probably worth $18, 15x dcf. Why don't you give us your value calc for WMB.
1.87x $15 ETE is $28. Warren was willing to dilute to 1.87x before. Again, WMB is undervalued at $23. If I didn't own so much, would buy more. And ETE without a deal is a buy in the $13s, but I don't want anymore with Warren factor.
tracey, if I remember correctly, it was said that WMB wanted the cash portion of payment. That means Warren was happy was happy with 1.87x deal, .13 more is only 100mm units more, he didn't mind diluting his owners by about half that with his conv pref plan which enriched himself and his cronies. He doesn't mind diluting as long as he is somewhat protected. And he's going to grant options for 10% of equity after the deal, again dilution to owners for employees to benefit. This is probably the best reason to vote against the deal, Warren. Not sure you want to partner with him in a $100 billion company, he could drive it into the ground, won't be able to sit still without doing deals, he wants to exceed Exxon in size. The super major midstream company.
Ok, look at SE, yielding 5% wiht 120% coverage. Take WMB, assume cash coverage is 90% of $2.56, $2.30 with dive at 120% coverage, $1.90 div at 5%, $38 stock price. WMB is undervalued currently no matter how you cut it. ETE wss diluting with the deal to begin with medium term for the long term benefits of having a system that connects all of the major basins. The $6 billion equity cost is now 8% vs debt of just under 6% for the two year note, maybe a long term is 7%, talking about less than a $100mm of cash cost. Figure it takes 350mm more units at 2x, $400mm increase in dist vs $6000 b at 5.75% interest, and that's short terrm, maybe 7% longer term, interest would be $420mm vs $400, that's not much. Does dilute future cash flow, but $400mm in savings, that's 15 cents of add'l cash per unit. And the synergies should come back, assume it's a billion instead of $2, a billion is 40 cents per unit. The deal at 2x would make sense. Does dilute but five years out, would be a powerhouse. Who knows, Warren may secretly want the deal at all equity, we really don't know on either side what the goal is, even as we speculate, it's amusing but getting it exactly right, would be and accident.