Bloomberg reported yesterday that ..."Corn futures tumbled to a 40-month low and wheat fell to the cheapest since 2011on speculation that... the Department of Agriculture’s report on Jan. 10 will show ample world supplies. Inventories of corn in the season ending Oct. 1 probably will rise to 163.08 million metric tons, the highest since 2001, and U.S. winter-wheat planting climbed to a six-year high... Gains in food costs around the world have also slowed as record harvests from India to the U.S. and Brazil bolstered supplies and sent corn, soybeans and wheat into bear markets. In 2013, the Standard & Poor’s GSCI Agriculture Index of eight crops tumbled 22 percent, the most since 1981...Corn futures for March delivery declined 2.1 percent to close at $4.17 a bushel on the Chicago Board of Trade... The decline in futures accelerated as the dollar climbed to a four-month high against a basket of 10 major currencies, eroding the appeal of U.S. exports. “Commodities are out of favor with investors” because of the Fed’s decision (to start tapering) and rising global supplies, Terry Reilly, the senior commodity analyst at Futures International LLC in Chicago, said...In Chicago, soybean futures for March delivery dropped 0.5 percent to $12.6925 a bushel, and Global reserves will rise 19 percent to 71.46 million tons from a year earlier on increasing supplies in South America, another Bloomberg survey showed".
many junior E and P companies sold off today while refiners rose sharply as the price of WTI fell to 5 week lows. I regard falling oil prices the main risk of holding TPLM, and some refiners expect the current boom in production growth in the bakken to continue until 2017. Given takeaway bottlenecks in the Bakken, falling oil demand in the US, and the existing block on exporting domestic oil, I would not be surprised to see US oil prices fall further, with downside for producers. Given the downside risk, I am not buying shares, but am selling puts- sold July 7.5's today for 0.90, yielding over 20% annualized if they expire (or basis of 6.6 if put to), with the goal of generating income. I earlier started my position selling a few July 10 puts for 2.20, with the intent of buying shares with a basis of 7.8 (which I targeted as my initial technical "buy" price target because 7.8 is the prior area of resistance on TPLM's weekly chart before last fall, so likely to be a strong area of support going forward)
But I would not be surprised to see TPLM's stock price fall further (with very strong chart support at ~6) since small cap E and P companies running debt will likely fall further if US oil price falls further as US production growth continues to boom
or if the broad market corrects- last year's boom marked the 5th straight year of gains, I don't expect big gains this year so I'm selling puts, putting time decay on my side so I can profit even if the market goes sideways from here
but if price does crater further, I will add as longer term I am betting management will keep improving operational efficiency, caliber and rockpile diversification will add stabilizing growth, and oil price won't fall far enuf to kill TPLM's EPS growth over the next few quarters
what is the forecast for US oil price in a year from now?
I did pull the debt ("298 m mrq") straight from the yahoo Key statistics website so your clarification is well taken, I will go to their 10Q
and if i posted less I could spend more time on 10Q's!
so thanks for the inspiration- goodbye yahoo message boards!
just from the daily chart, the previous resistance before the breakout to 11 was upper 7's (6/19, 7/19, 8/8/13), shares could possibly test that support... But, as The Zachs downgrade is based on the big increase in operating expenses (without mentioning that that included a big jump in investment in rockpile) and the miss (without mentioning that the actual growth was huge, or that caliber paid out a fat distribution shortly after the earnigns, ) and lowered guidance (again without noting that the forecast growth still remains quite high)- Zachs is all about analysts raising estimates, so when they lower estimates (even if estimated growth remains high) that triggers a downgrade in their ranking system. But TPLM's growth story still remains intact, barring a big drop in oil prices (w2hich was not mentioned as part of the Zachs 'sell' rationale), so analyst downgrades may represent a buying opportunity. We shall see
although I do note CEO Samuls sold shares at 9.02 the day before the zachs downgrade last friday, TPLM cash flow does not look impressive, and debt/ebitda of 4.8 (versus KOG's 4.2, AXAS 2.6, SM's 1.3) could make financing expensive for TPLM
yes it costs a lot more to buy a given put when its stock price craters, but when you resell the longer-dated put, it also goes for a high premium (higher, actually, because as liz correctly states the time decay premium is higher for longer dated puts). I got burned with a stock (EBIX) that i had sold 19 strike puts on before the stock totally tanked (after a buyout offer fell apart), but I just recently rolled those (now deep ITM) puts forward for an annualized yield of ~12% on my equity, even though shares are currently trading with a 14 handle.
its like receiving a quarterly distribution, except instead of management distributing a dividend, I roll the options forward. I fully view it as an income stream
actually, QRE has $326.5 million of borrowing availability left under its revolving credit facility, so they don't really need to do a secondary for an acquisition like last year's Jay field drop-down ($145 million) or the east Texas deal they closed in august for $107 million. It may be a matter of finding a good deal that fits?
The numbers I cited are straight from Aberdeen's website, maybe Morningstar is calling the entire distribution income but the upcoming distr. does indeed represent 26% ROC, which ijust happens to be the percent of 2013's total distribution made up of ROC... This fund, WITH dividends reinvested, has more or less kept pace with the chile index- but I would not consider it a suitable fund to hold just for generating income
the gap on daily chart between 17.6-17.9 looks like it wants to get filled. But the preferreds coming n a year will drop distribution coverage to under 1 in the absence of new deals, not to mention management didn't sound too encouraging (to me anyways) about restructuring the GP incventive structre, even though it seems like it would be easy enuf for them to agree to eliminate the convertibilty of B units- which would truly align the interests of management and unit holders
a price surge would offer them an opportunity to do a secondary to buy something accretive, however, so a nice rise could snowball into a really nice rise if they can raise distribution. But I'm not holding my breath and hope you don't hurt your shoulder :)
the jan 15 10/8 put spreads are selling for over a buck, that's over a 50% annualized return
extremely risky, but one can always roll forward but probably not for that kind of return in the event NLY is well under 10 in a year from now
whats the deal, realgman
incorrect, Ed- look at the table in the dec 10 headline on the Yahoo sunmmary page for CH- income represents 5% of the distribution, capital gains 69%, and return of capital 26%
i owned a corn-to-ethanol-plant (United ethanol in wisconsin) in the early days before I came to realize how bad an investment it is and sold out. As I recall, the energy output derived from a gallon of ethanol was on the order of 10% higher than the amount of energy to produce it, in total- which, in light of the huge allocation of arable land and water also required to produce ethanol from corn, makes it not worth it in my opinion, except on a small scale as a safer replacement for the oxygenate mtbe in gasoline
thanks for the link. Hey do you consider the coming increase in domestic uan production from CF 2015 etc and the huge jump in chinese exports of urea this year are going to be headwinds for appreciation of UAN unit price going forward? Unless growth in china really picks up enough to raise the price of coal (which chinese use to synthesize urea), their exports and thus fertilizer prices generally may remain at current depressed levels. If that happens, UAN's distribution will also be stuck near ~$0.35/unit/Q, is that a high enuf yield to support current price given the risk and volatility of variable rate MLP's like UAN
anyways happy holidays all!!
BIP's 27% interest could boost book value going forward, if a high percentage of VLI's planned $2.5B investment adds book value. If the planned $2.5 B VLI investment increases book value by say $2 B, BIP's 27% would translate int an increase in book value in next 7 years of $0.32 B. That, plus the initial stake of $0.35 B (which i presume for sake of argument adds 0.23 B book value- i.e., barely accretive to P/B)
combined will add $0.55 B in book value., or a 14% increase, in 7 years. On top of whatever cash flow the new holding will generate from concessions, which will likewise increase as VLI expansion plans are realized
the main risk I see is potential inability to get higher capacity utilization according to BIP's CEO Sam Pollock, "We expect volumes in this business to increase as the economy improves, as customers make use of our surplus capacity and as we pursue expansion opportunities, providing us with attractive future organic growth."
BIP gets a 27% stake in Brazilian Port/Rail concessionaire VLI for $0.35 B to close mid-2014, a signifiaant stake relative to BIP's $3.76 B book value and VLI's plans to invest over $2.5 B over the next 7 years should have little resistance from Brazil's government, given how bad (some would say crippling ha) Bz infrastructure is. I will be interested in reviewing the deal's details when they become available, but this could be a real growth story for BIP
I just calculated 2-1-1 crack spreads using eia prices for WTI cushing oil, gulf coast gasoline, and gulf coast diesel, and find the Q4 crack spread so far ($15.7/Barrel,calculated using all of october and november but only the first 2 weeks of december) is almost identical to the 2-1-1 crack spread for Q3 ($15.6/Barrel).
recall that, in Q3, CVRR would not have paid any distribution at all without the "release" of $60 m of excess cash from cash reserves (this is shown in the next to last table of CVRR's Nov 1, 2013 press release). Thus, Q3 operations actually generated NEGATIVE $16 m in cash available for distribution. Since the crackspreads of Q3 and Q4 (so far) are the same, I am expecting CVRR will again make a very small distribution. Yes, the Q3 downtime at coffeeville reduced throughput by 32,000 bpd; so, generously assuming the lost production would have obtained a refining margin of say $12/barrel, that still would only have generated an extra $35 m revenue in Q3- and even if that ALL was distributed, would have generated a distribution of only $0.13/unit in Q3 (in the absence of release of cash reserve). Since the Q3 and Q4 crack spreads look identical so far, I would thus not expect the Q4 distribution to be much more than $0.13/unit- unless they tap cash reserves again, of course
am I missing something?
the continuing growth in supply has one downside, and that is downward pressure on bakken oil prices, since all that oil has nowhere to go except the US, and US oil demand has not kept up with supply as a consequence of improvements in US energy efficiency. Producing Oil is TPLM's main biz, so weaker oil prices (that may accompany increased supply) will dampen the impact of growth in rockpile, caliber, and TPLM 's production...I'm guessing that bank of america also is thinking bakken oil prices may weaken, since they forecast NTI's 2014 distribution is going to massively jump from last Q- i.e., if they expect increasing bakken supply will significantly lower its cost to close-by end-users like midwest refiner NTI, that would explain why they think NTI's crackspread (and thus distribution) is about to jump wider...falling oil prices is the main risk I see for TPLM
BOA on Dec 3 raised their estimated Q4 distribution to 0.36/unit (compared tp 0.31/unit Q3) and raised their 2014 distribution estimate to an astonishing $3.52/unit , so BOA expects an imminent and massive widening of NTI's crack spread
if BOA is correct, than the Jan '15 25 puts selling for $4.80 now are a good deal, not sure I trust BOA though
teamster union workers at NTI's single refinery voted to strike if needed a few days ago, in response to management demands to cut jobs, cut wages and create "onerous" (union words) changes to working conditions as part of negotiations over the contract renewal (which ends Dec 31, 2013). Sounds like western wants to wring as much out of their new investment as possible (although having experienced and happy workers in a plant that can blow up or catch on fire at any time seems like it would be in owners best interest...) anyways Bloomberg reports that NTI spokespeople do NOT expect disruption at the refinery