Be interesting to know just what kind of return ETP expects to make on this deal. I'm speculating the terms were too good for EdgeMarc to refuse and that this might be a low return deal for ETP to get a g&p toe-hold in the region. On the margin, it would seem to be negative for MWE to not have the business but not a threat to their growth potential. Market share in the M/U will be interesting to track in the years ahead. Rogersville could be exciting if the hints about potential prove out. MarkWest can dominate there as they do in M/U with others scrambling to catch up.
I looked up EdgeMarc and they're a pretty small player. Their leased acreage is about 25,000 in the Utica(2 wells) and 25,000 in Marcellus(20 wells) According to MWE, Utica acreage dedicated to their operations is 3.7 million in the Utica and 4 million in the Marcellus.
I haven't owned MWE very long so if they did sell it I would not have a significant tax problem. KMP was painful tax-wise but capital was reinvested in EPD and MWE. My tax basis in EPD is close to zero similar to yours in MWE having owned it for over ten years.
From a distribution standpoint, MWE has a nice yield and very good growth prospects but I believe EPD's high coverage, strong balance sheet and diversified cash flows make for safer, more predictable future growth of income and capital. If EPD's coverage was 1.1x like MarkWest, they'd be distributing about $1.90 and yielding 6.06% at current $31.25/unit. Though I consider it more risky, I would like to increase my MWE position and have sold the Nov 65 puts short. If exercised, I'll add to my position for $58/unit and a yield of 6.3%, assuming the Nov. dist. is $.94. But because MWE is so volatile, I have also sold the Nov 70 calls for some downside protection. I hope nobody offers $90 for MWE before Dec! .
Looks like institutions hold about 71%. If Kinder did offer $90 the pressure to sell would probably win out but I hope that doesn't happen. I prefer cos. that build over those that grow mostly by acquisitions and Markwest is an organic growth story that I'd like to see play out in the years ahead. I think they will reward patient investors very well. If Kinder or other made an offer they couldn't refuse, well, I could always buy more EPD. No chance of a buyout there and it's cheap.
Thanks for crunching the numbers. I'll be satisfied if they achieve that guidance but I hope they do better. If all the needed takeaway capacity gets built and we get a cracker or two in M/U, then NG/NGL pricing should improve and vols. and fees should grow nicely for many years. Still plenty of opportunity in SW, too.
I find it difficult to understand why MWE is frequently mentioned as a buyout candidate, by KMI, for example . Why would they want to sell with so much growth ahead? As long as they have competitive access to capital it's hard to see why they'd consider selling.
They might have some insight via Cimarex since XEC has a completed Rogersville well and they're now a new MWE customer in the Permian. That they're talking about it that way makes me think we'll see something this year to justify the big ramp in leasing activity. If so, MWE is in the perfect position to "own" the play like they do in M/U.
Good catch. 10x looks good and will be better in synergy w/ other EPD assets. Classic bolt-on to strengthen growing EPD condensate export franchise.
It may be accretive but the price is full. 2.1B for assets generating 100MM cash flow. There's synergy with other EPD assets and locks in condensate supplies for export. Would love to know what EPD's internal cash flow multiple calculation is on this purchase.
The interest savings are real but partially offset by the premium they are paying to retire the old bonds. Looks like 5-11% depending on the issue.
NAPTP replay link is live on MWE site. Some very forward looking comments from Frank about a new Mont Belvieu with MWE as midstream nucleus in Marcellus/Utica. He's very positive on propane exports from Mariner E/Marcus Hook.
Really looking forward to their analyst/investor day webcast on 6/3.
It's in MWE's new Investor Presentation on their site. Not the NAPTP presentation they also put up today. No detail just a mention along with a pic of Langley and their capacity in SW WV and E KY. Going to be interesting to see how this develops.
good stuff. Rogersville gets a slide in new presentation for NAPTP.
Cimarex Rogersville well
Hah! Forgot all about those KY plants. Co. never talks about them. 395MMcfd processing running at only 37% capacity. Great upside from what's already there. If Rogersville produces looks like MWE is in the catbird seat.
Thanks for the reminder about this future play. NE will make MWE number 1 processor in yrs ahead with lots of reward for patient unitholders. Now if we can just get a couple crackers going to help take ethane.
From the Nov presentation(slide 29) MWE's '15 DCF guidance was 836M based on their midpoint volume estimate and a NGL price of $ .90 per gallon. Midstream Business has $19.59 per MBV NGL barrel on 12/31. At 42 gal/bbl that would put a gallon at about $.47 or 1/2 of guidance est. Volumwise It'll be very interesting to hear what their producers say and MWE's reaction. At this point I've lost confidence they'll make their +7% distribution guidance and just hope they can sustain current level.
MWE not mentioned in Summit's PR though Ohio Gathering JV gets mention. I don't see that Summit or Regency have any Utica processing plants. Regency's Ohio River pipe shows a proposed 36" spur to Cadiz processor tailgate. I'm thinking that must be MarkWest. Can anyone confirm? Or does this lean gas not require plant processing?
Just noticed Moody's rates MWE debt covenants at 4.43 out of 5 vs an avg of 3.58 for peers. That helps explain why the bonds are trading well and increases confidence MWE will have better access to debt markets than some others.