The AL and MS businesses are clearly non-core. EBITDA less than 8% of next year's EBITDA total but yet, due to the low risk, we can get a high multiple. Plus, we need some serious debt reduction programs and selling AL and MS is a very clear way to get there. In addition, the GS&A costs ought to go down for not having to deal with two state regulatory agencies for energy, environment, taxes etc.
So John was able to ascertain from IR that the AL and MS business has an annual EBITDA of just $ 8 million. Since that is less than the already low $ 83.6 million for 2016 - AND - since this is clearly a very low risk business it should sell for a better multiple, let's say 10 - 12 x EBITDA. We should be able to get close to $ 90 million for that. Take that $ 90 million and pay down the debt, term or revolver and get the total debt down. That should get us down to covenant compliance much faster.
Not sure if it is a situation of deliberately downplaying positive news. Seems to me more like the Tres Amigos not really giving it a damn. They are short timers and they know it. As I read the CC for Q1 from TRGP and DPM, both of which are G&Ps, and then reread the last CC that Bonn et al gave, one gets the impression that Bonn et al really do not know how to present a positive image. Odd though, upon reading the Q3-2015 CC, Bonn et al were, however, quite positive about the future. Now, they simply do not give a rip.
You seem confused. The newly issued shares by SXE to the PE firms for the equity cure - they did not nor will they ever be part of the public trading. Thus, they had absolutely nothing to do with today's or yesterday's trading.
You need to understand that EIG and Tailwater want to keep these units in their pocket so that they can accumulate their magic 80% for total control.
On # 1, if the annual EBITDA for the AL and MS business is only $ 8 million, then with 2016 EBITDA pegged at $ 86.4 million going up to $ 110 million next year, then they should sell the AL and MS business. They should be able to sell those for about 10 x to 12x EBITDA, or about $ 90 million or so. Take that money and reduce the revolving debt.
On # 5, their response does not make sense. They have already told us that 2016 EBITDA will be about $ 86 million, there is no way they will get under the 5.0 debt/EBITDA coverage without more equity cures or relief on the covenants.
Truly appreciate your feedback. Response to # 7 does not surprise me. There is no way IR could really tell us the truth - and they are not. However, taking their response literally, the big retention bonuses for the Tres Amigos is good to November 1, 2016. That is a fact and IR stated that was for the long term ?? Confirms my suspicion, Bonn et al are not needed beyond that date.
Truly amazing that LGCY was up 13% during regular trading already. Blows my mind that LGCY with all of its residual problems is trading at 3 - and our little SXE at 2
The 8.04 million of new units issued to Holdings were not and will not be part of any public trading.
Thus, there should be no effect on the public trading of SXE other than the fact that total units outstanding just went up by 8 million units, meaning Holdings' part of the total pie just went up by 8 million.
The emphasis is on SHOULD because there are way too many people trading SXE who think that these 8 million will be traded now, which it will not.
Hopefully, you had a chance to talk to IR, would be curious to know their responses.
Seems that you are referring to something else, other than SXE is that correct?
How about asking what percent of the total EBITDA is coming from the pipeline businesses in Alabama and Mississippi. These business are less tied to the price of NG but are driven by the flow of NG to various customers, like power plants and other industrial facilities. Therefore, they should be worth more now due to the stable income.
What if the AL and MS pipeline business were sold off, pay down the debt, and concentrate on the Eagle Ford. This would go to Cube's question about selling off assets.
Seems that you are missing the point. The point is/was that whatever revenues that SXE is recording, they are independent of the capacity. The key issue is the financial efficiency of SXE's operation. Their operating costs are significantly higher as compared to their peer group.
Have a look at TRGP's web site and you will see that they operate a large fractionator in the Eagle Ford, rated at 200 MMscf/day. DPM also has a lot of NG and NGL facilities in the E/F. Just look at their web sites.
Bottom line; they are larger and better buying power - pure and simple.
The issues you bring up are truly valid head winds for SXE - but that is the same for the other G&Ps.
Let's face it, all of the oil and gas MLPs have been operating at sub par utilization over the last year plus, correct?
Next, interest expense does not come into play for the operating costs per se. That category is for internal labor and supplies as well as sub-contractor or vendor costs plus consumables, such as electricity, water, etc at the various gas processing plants and/or compressor stations, etc.
Thus, given under utilization of capacity at SXE's peer group, my point still is that SXE's cost as a percent of revenues is way too high as compared to its peers; CEQP, DPM, or TRGP. The fact that SXE is so small compared to the others, shows that we do not have the economy of scale that the others do.
If SXE could operate at an average of those three, then there would be an additional $ 60 million in EBITDA available - a hell of a lot more than the suspension of distributions got them.
Totally agree with you; the banks will, IMHO, not want to wait around, in search of some optimum time for market improvement and then sell. NO, they want this sold and soon.
Yes, the Russians want to sell their nat gas to Europe - but - Europe has seen all too many times over the last few years, that Russia has cut their gas off in the winter to make whatever political point that they wanted to make. Bottom line: Russia is not a reliable supplier of NG and the Europeans know that.