a lot of the gathering for their system comes from holding's gathering pipes. these are very wet
areas. that is why they went into ngl pipelines and fractionation.
if oil goes to $50 and it is 40-45% of production and ng is 20+% of production, ngl prices are the
key to make those areas economic.
simplemath: assume 45% oil @ $50, 25% ng @ 2.5 ($15/bbl), 30% ngl @ ???.
if you assume need to have $35 bble to survive (cash, interest, opex, lease etc.), ngl would
need to be $29/bbl. that would yield a $14 margin between ng and ngl (which is the thing that
determines fractionating's margins. that margin is right now $8-$9 per boe.
propane export helps a lot. marcelius ngl volumes going finally down would help in a huge way.
ethane pricing partial recovery would help a ton.
the upside at sxe (and parent) is at the ngl side - if they made 25,000bbl/day process (capacity)
and got paid $4/bbl, and if holdings were at 65,000bbl/day the same way (65% utilization at
lower margins), most issues would be going away. the same way sxe owning the ngl pipes in &
out of Robbstown would increase margins hugely on higher utilization case.
anyway, hope the math works for them.
here is a fact: banks work with whoever still pays them interest. in this case, over time the loans would be
paid off. banks can only wish "bad loans" looked like that...
keep in mind, if it was not for the etg 10xebitda drop down azur would not have been in trouble. gp can be
in legal trouble unless they fix it. they control the management and they made a drop down that monetized
their private holding at the expense of a public company. they appointed the people in the fairness
committee as well. hard to walk away from that. anyway, what do I know.
not really. that could effect less than 10% of cash for distribution. if it helps
stabilize chk long term, that would be a decent trade off. reduction in dividends
and reducing debt / increasing equity are baked into the price.
it does not mean that price can not go down further for a while, just that the price
of the stock reflects good returns in a bad scenario.
only in my personal opinion.
you do not buy term at discount. this is a bank loan. it is low interest and will have to be paid back over
time (unless ebitda goes up). banks do not want to liquidate, especially when the company can pay over time
based on bottom of cycle numbers.
The issue here is the holding. they have gathering system and ngl exposure and over $500M of debt
without the cashflow to support it. beyond that, they got preferred shares which could wipe out the equity
(which is why one of the pe companies did the last cure as an unsecured loan directly to sxe).
sponsors can not invest through holdings in sxe (if holdings goes into bk, they
will lose their investment or get paid pennies on the dollar), so they need to
lend directly to sxe as a mean to cure borrowing base shortfall and get paid
back as sxe accumulates cash flow.
sxe is ok, but it can not refinance and needs the sponsors to help it get time to
pay debt. call it cure or whichever way you want.
good luck to the company and to us.
this is not increasing debt. it will be paying off some of the line
with money from the owners of holdings. the bank should
love it. it reduces exposure for them.
the loan was not pik. it was a one year loan at 7%/year.
by the time it comes due, sxe's cash flow would be able to
deal with that and the line would not be maxed at $140M
yeh, nothing screams bk than worst case $450M ebitda vs $2.5B debt with about $150M/year interest
expense. if they pay (on 68.12M shares outstanding) $2/share, they will have $163M to reduce debt (or buy
shares if the gp will allow them...).
The $450M includes anticipated $30M/year hit from quicksilver (40% of $70M revenues for 2016) and
over $20M for others (chesapeake or whoever else).
I hope you do not short something that will cost you 20%+ / year based on $9/share in dividend.
If it falls, I guess I will have to buy some more.
Anyway, what do I know.
ask first reserve. they are the sponsor.
they should have started doing it long ago. it does wonders to finance projects while your
notes are close to par ( 90) vs in 70's. they probably would not have needed fr to do the
permian investment for them. anyway, just my opinion.
good question. how sustainable is their cash flow is the right question. there
are a couple of things that could be hit if bk wave gets much worse. there are
other assets that are worth together much more than the total debt.
that is my opinion.
look, here is the deal here: most of the cash generation is coming from assets that at other
companies are valued at 10+ times ebitda. over here they need to reduce debt by reducing
dividends while they wait for their expansion projects to become cash generation pluses
plus they need to see how much damage to their revenues is created by bankruptcies.
long term, you are getting a decent part of their assets for nothing at these prices.
by the way, how much of the current debt is reflective of current expansion projects? my
bet is well over $500M. that should count as something as well.
good luck to us and to the company.
reality is what is happening now, but investing is how to position yourself towards the future.
wise people re evaluate their assumptions once in a while.
its the parent, not sxe. the parent will probably end up under ownership of the preferred holders and
creditors. that is why the last cure was done for sxe not through them.
everything went against the assets of holdings so far.
lets hope I am right.
the two companies are tied very much together operationally. the ngl fractionator of holdings is
tied to sxe's system and is part of their proposition of value to custmers and the gathering systems
of holdings feeds sxe's pipelines.
lets see who takes ownership of the holding company's assets.
good luck to all.
yes. one of the most interesting aspects here would be the possibility of
flattening the structure and combine the holdings with sxe. that would give the
lenders a much better way to monetize their equity later on. that would also
give them the most incentive to make sxe valuable. if they put holdings into
sxe while figuring out how to put the combined balance sheet into a good
shape, their equity would compensate them for their entire exposure plus a
profit. public entities get much higher valuations than private ones. I am sure
they know it too...
anyway, only my opinion.
If you ever saw a system like Microsoft's great plains (aka great pains) you
would know how not simple accounting systems are (especially when you
buy from a vendor who thinks that complicating your life is good for him...).
they have the pipelines in alabama and mississippi which are as non core as they come.
those kind of pipelines and businesses selling to final customers can go for a much
higher ebitda multiple. the question is how much is the ebitda, because cbm wells are
not very economic under 4.5, but they are very low decline as well.
anyway, I think the independent work should indicate that the pe companies are looking
to keep a stake at holding and not walk away. I wonder if the work would remain private
or become public knowledge.
anyway, good luck to us and the company.