MWE has no problems starting in late 2016 because both of LNG sopping up excess capacity and moving prices up and industrial demand in both Gulf and canada for ethane rising by over 1BCF a day. Will increase profits from OK operations and big time in fixed fee in Marcellus where ethane is not processed today.
The deal is terrible. Short term problem is what happens to MHunter pipeline. Other than than volumes strong and looking like the will stay strong.
joe - MWE is still guiding for 10% in 2016 and 2017. They are slowing growth so the DCF coverage will improve because of two reasons - less new builds to ramp up (takes 3 years from start to get most full) and NG prices will change with big demand coming from both LNG exports and ethane industrial plants coming on line in US and Canada in late 2016. MWE actually got investment grade on its last bond issue (BBB-) so no real issues unless drilling collapses further. In that case no difference cause MPLX will stink too.
My question is simply how can MWE / MPLX grow at 20-25% while giving up a 50% IDR payment? Does that make sense to you?
Last, the $6.20 after one takes out taxes puts one about $2 behind using both the MWE and MPLX distribution projections in 2020 in payouts! Why give up what you know will work. MPC has no great dropdowns possible because they have a fiduciary responsibility to their shareholders.
ISS said MPLX is not going to increase the offer. Thus they felt a yes vote would be best - BUT they also said MWE did not conduct the sale negotiation properly and the Golden Parachute payments of some $56M to those like Semple that negotiated the deal should not be paid. ISS felt parts of the deal stunk.
Do you really care what they think? Whether it is a good deal for you depends on whether or not you have held for a couple years or more ($6.20 then likely taxable) and if you are planning on holding for over 5 years (The IDRs will certainly drag once processing margins return to normal lvels)
My vote is also no as the deal creates no value long term and the $$ received would go about 1/2 to the IRS in my situation. You situation could vary greatly.
A majority of shares need to be voted in favor if I understand correctly. By voting no now you are telling MWE and MLPX/MPC you are not happy. If enough of us say now they will either change the deal to something in the order of 1.3 MPLX and no cash or simply go away. Either one would make us better than we are today.
Why will distribution growth be better under MPLX with a 50% drag from IDRs? MWE DCF is only below 1X because it has so many plants either under construction or still ramping up volumes. Remember MWE stated they were going for growth and not DCF growth about 3 years ago. Slower growth for MWE will provide nice fixed fee DCF coverage and growth. All MPLX is offering is promises and about $4 after taxes!
Absolutely a scam. Best and final offer? This is their FOURTH best and final offer. Vote no. Vote is not going well. Keep the faith. It is not over.
MPLX is no better! Also we give up 50% of our cash flow going forward to IDRs. How is that better. Got to remember how much of what MWE owns is under 3 years old. Semple stated correctly that it take 18 months for build out and cash flow to start and another 18 - 24 months to fill. If our growth slows then DCF improves even at todays problematic prices. Slowed growth would add about 20% to DCF.
Do you really believe a $20-40B MLP can grow at 25%? Seriously? With 50% IDRs they would need to grow at 40% a year and be larger than all the MLP universe in 14 years!
David - The answer is you do indeed owe taxes, but the IRS has no real way of tracking this. The tracking data is changing and will come about either in 2016 or 2017. This came up because of the massive sale all on the same date with about $1B of taxes due! Another reason not to place MLPs inside an IRA.
B&W - You do understand that MPLX has not promised anything going forward. The increases is payouts are only guidance subject to change. OK?
As to slowing growth - GREAT. Slowing growth would provide two things for MWE. First a match to the slowing growth in drilling in their primary area that is happening already. Second the ability to increase their distribution faster because of the 3 year lag between a project being started and full rampup. Do agree that MPC is probably a buy, but it is into many other things and not simply a GP. If MPC was a GP and only that I would be selling my MWE and moving on. I would suggest the IDRs do not guaranty anything. In about 5 years the MWE assets will be have much of the depreciation gone and rebuying MPLX and thus MWE would make for good sense just like KMI.
The fools here are both of us for not selling in the 70s, paying our taxes and being able to rebuy at half off.
Mike - The calculation is simple - if you sold nothing then you add the positive numbers in boxes 20V. You IGNORE any negative numbers. If over $1000 your custodian must file (charging your IRA) and pay out of your IRA. If a sale then there is recapture and more complicated as you indicate. Pshonore is correct. This issue is not going away, but rather getting bigger.
To the OP - I have never had a positive number for UBTI with ETP. Others have often or usually had positive numbers ie. MMP and the old APL.
Some 5000 people involved in the KMP rollup did the same thing and are now being billed by the IRS. A sale of a MLP constitutes a gain even inside an IRA and thus if the net ordinary gain is over $1000 it is taxable INSIDE an IRA - especially a ROTH. Has not been an issue but IRS has more tracking data every year.
Scary comment. First - ETP pays a distribution and not a dividend. Your partner allocations are based on a K-1 that has little to do with the quarterly payout. While ETP historically has had no UBTI, UBTI is legally collectable on a sale inside an IRA. There is an article today about KMP on exactly this. Caution on putting a tax shelter inside a tax shelter. Might have ugly consuqeunces.
The deal is already done. The institutional holders make it a done deal. No point in discussing this. Also the deal is really exactly the same as you got units not $$$ and the ratio is the same.
I DID and B&W you simply cannot. My basis is zero and I would have owed recapture of $14 in taxes per unit at 35% Federal tax rate and a 4% state tax on top of that. I would have had a capital gain taxable at 27.8% on $30 per unit. Total taxes $8.34 plus $14 or $22.34 per unit. That nets to about $55 per unit which last time I looked is about $16 per unit more than MWE sells for today. Your "analysis" forgets that I could then have invested those dollars elsewhere and earned a dividend, interest or ??
The problem is that you are assuming that everything is going to work out going forward for MWE. It has NOT worked out for the last 4 years despite your cheerleading efforts. Is there any more reason to believe it will work out in the future with a 50% IDR? Semple who I know and do believe in disappointed us with poor numbers over and over. Sorry - you calculation is balderdash.
Absolutely amazed to learn that my MWE units are now worth some hundreds of thousands more today than 4 years ago. I have reinvested all payouts and added units and my account is still down by about 30%. Yours is too!
My cost basis is ZERO because of MWE paying out a return of capital. The cost basis _ WHAT I PAID! - is about $56 per unit., thus I am down $11 per unit plus have a recapture of about $14 per unit and on 10K of units would be DOWN $250,000, not up.
PS - No chance of a bump as proxy already approved and institutional and GP votes make it a slam dunk. They do not give a bit what we think.