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iShares TIPS Bond Message Board

cheapstkbuyer 15 posts  |  Last Activity: Aug 18, 2014 5:09 PM Member since: Nov 16, 1998
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  • Reply to

    A "Texas Tax Inversion"

    by ut1953 Aug 14, 2014 3:01 PM
    cheapstkbuyer cheapstkbuyer Aug 18, 2014 5:09 PM Flag

    If they were starting from scratch, Texas would be a more logical headquarters, but I am not sure Hal and other senior management wants to move there.

  • cheapstkbuyer cheapstkbuyer Aug 12, 2014 12:31 AM Flag

    No payments between Feb '09 and May '10. So, they skipped 12 mo.s payments. Not necessarily due to cashflow, but mainly a bank covenant issue.

  • cheapstkbuyer cheapstkbuyer Aug 10, 2014 3:22 PM Flag

    Distribution was $2.08 pace in 2008, so it depends on your starting point. 0% since then, plus a period when it was zero.

    Better measure is growth in DCF/share, which has not been much over the long term. Mainly an income investment.

  • Reply to

    Sell BBEP short, buy QRE?

    by coochy.cooty Jul 29, 2014 12:57 PM
    cheapstkbuyer cheapstkbuyer Jul 29, 2014 4:49 PM Flag

    Due diligence could uncover bad news about Qre , and that causes them to back out. Wouldn't be good scenario for this trade. $80Mm cancellation fee works in your favor.

    If you are on margin, you will have to borrow to post cash collateral against the short.

  • Reply to

    How bad was the quarter? This bad.

    by coochy.cooty Jul 25, 2014 6:48 PM
    cheapstkbuyer cheapstkbuyer Jul 28, 2014 10:34 AM Flag

    Any thoughts on them shifting towards horizontal drilling in Permian basin? About half of their capex budget is in Texas, and they seem dissapointed with well performance. This seems to be the biggest issue in listening to Mark Pease. Crown rock was probably deferring maintenance, because a large number of wells acquired in Permian had problems (pump failure, etc). I didn't get a sense they were dissapointed in Postle so far.

  • Reply to

    How bad was the quarter? This bad.

    by coochy.cooty Jul 25, 2014 6:48 PM
    cheapstkbuyer cheapstkbuyer Jul 26, 2014 1:27 PM Flag

    In CC they say Permian basin wells are performing below expectations. 48 of 77 wells purchased last year had some kind of failure (pumps, etc). Down well improvements have been made. They are planning shift to more horizontal drilling, and are considering partnering with others to do this. They say they expect ultimately better returns from horizontal, but it seems they don't have much experience in this. Higher decline rates in horizontal. Some comments on options to make horizontal more mlp friendly.

    OK seems to be pretty much meeting expectations, despite 2cd quarter decline in production. Co2 injections will increase production later this year.

    CA had some high one time maintenance costs, but should help make more efficient in future.

    They emphasize possible capital efficiencies, having bigger portfolio to work with. Low double digit production decline rate after closing, dropping to single digit as time goes on.

    2.5 bil borrowing base will have 0.25% lower rate. But will be at high end of utilization they want after closing, so expect efforts to reduce it. I believe they said $20mm ATM in quarter. They also expect to take out QRE bonds (some at pretty high rate). I assume new senior notes to replace those.

  • Reply to

    How bad was the quarter? This bad.

    by coochy.cooty Jul 25, 2014 6:48 PM
    cheapstkbuyer cheapstkbuyer Jul 26, 2014 10:31 AM Flag

    All the growth in the Permian basis must be causing some bottlenecks. This is hurting realized prices vs the hedges. Not a permanent problem, but sounds like it will be around for a while. Plus leverage will require more equity. So, coverage will likely remain low for a while. Not sure the basis for boosting the distribution while this is going on, but management seems wed to that strategy.

  • Reply to

    nosweat82 your thoughts on acq/merger please?

    by moneyonomics Jul 24, 2014 2:34 PM
    cheapstkbuyer cheapstkbuyer Jul 26, 2014 12:35 AM Flag

    Yes, I get pro-forma leverage about 4.0 without any equity issue. So, equity or preferred probably on the way. Any signficant amount will likely knock coverage below 1.0, but of course will depend on if they can improve (or fall short) on ebitda.

  • Reply to

    Terms of QR GP buyout they will need to meet

    by moneyonomics Jul 25, 2014 3:25 PM
    cheapstkbuyer cheapstkbuyer Jul 25, 2014 5:17 PM Flag

    I hope it's part of the 72mm shares. Not sure how they got up to 72mm otherwise.

  • Reply to

    QRE preferred

    by cheapstkbuyer Jul 25, 2014 11:54 AM
    cheapstkbuyer cheapstkbuyer Jul 25, 2014 1:47 PM Flag

    Any guess on how much the CO2 is costing them? Other question is how do we think they will finance the $350MM to pay off preferred? Based on leverage, I assume some additional shares or bbep preferred.

    My rough numbers combining 2 companies (this years #s). Of course room for improvement from this years results and likely more cost savings, but hedges worse next year as well:

    Ebitda 750
    Int exp (171)
    Maint capex (197)
    bbep prefrd div. (16)
    Cost savings 20

    DCF ~386

    Debt: 2950 (assumes half of GRE $350 preferred financed with debt)
    Leverage 3.8
    Shares outstanding 200 (120 + 72 to GRE + 8 to pay off half $350 preferred)

    Dcf/share ~$1.93
    Coverage

  • cheapstkbuyer by cheapstkbuyer Jul 25, 2014 11:54 AM Flag

    In looking at the QRE preferred, I see that they were paying an artificially lower rate until the end of this year. That boosted DCF by $4Mm a quarter, or more than 10% vs 2015 and later. So, DCF would look worse once they started paying the full distribution. Impact on BBEP will depend on how they finance the $350mm to redeem the preferred. Some will likely be more equity shares or more preferred.

    One other headwind I see is lower hedge prices after this year for both QRE and BBEP.

    I see coverage still at 1.0 less, unless big cost savings. Any estimate on what those might be?

    "On October 3, 2011 (the “Issue Date”), we amended our First Amended and Restated Agreement of Limited Partnership to designate and create the Preferred Units and set forth rights, preferences and privileges of such units including distribution rights held by the Preferred Units and us. For the period beginning on the Issue Date and ending on December 31, 2014, we will distribute $ 0.21 per unit on a quarterly basis. Beginning on January 1, 2015, distributions on Preferred Units will be the greater of $ 0.475 per unit or the distribution payable on Common Units with respect to such quarter. The Preferred Units are only redeemable for cash in a complete liquidation. The Preferred Units are convertible into common units under specific circumstances at the option of either the holder or the Partnership into common units representing limited partner interests in us on a one-to-one basis, subject to adjustment. The Preferred Units have the same voting rights as common units. As of December 31, 2013 we have accrued a fourth quarter distributions payable of $ 3.5 million to Preferred Unitholders which were paid in February 2014."

  • cheapstkbuyer cheapstkbuyer Jul 24, 2014 2:19 PM Flag

    $350MM cost for preferred on top of the 72MM issued to common holders? I looked at balance sheet of QRE and did not see the preferred, but maybe lumped in other equity. Sounds like more dilution than I thought due to complex structure.

    I sold some recently (over $22) as first sale since started buying in 2008. Was tempted over $23 yesterday, but missed my chance.

    $2.08 distribution just back to were it was in 2008. DCF/share still lower than 2008, despite lots of aquisitions and growth capex. My sense is managment running hard to just to maintain current DCF/share. Makes me concerned how sustainable the strategy is long term.

    Some cost savings certainly a plus, but also more chances for management to make mistakes.

  • cheapstkbuyer cheapstkbuyer Jul 24, 2014 12:20 PM Flag

    QRE had $66MM DCF in first half. That annualizes to $132MM. Throw in some cost savings, and bump it up to approx. $150MM/year. Divide that by 72MM shares issued by BBEP, and you get $2.08 DCf/ new share issued. So, on that basis, accretive to DCF/share for the combined entity. But at $2.08 distribution, all the new DCF will go out in distributions to new shares. Combined coverage would still be less than 1.0.

    Leverage at QRE ~ 3.5 with $974 debt / $270 ebitda first half run rate. Plus $147MM deferred class B unit obligations. What is that? Leverage might be even higher.

    Where do we go from here now that the size of BBEP is getting much larger? Can management really handle a much bigger company as effectively? Harder to do any aquisitions that are accretive.

  • cheapstkbuyer cheapstkbuyer Jul 24, 2014 11:33 AM Flag

    Really? Derivatives are hedges, and they are well known in advance. So, a loss on a hedge would be offset by a gain in operations. Their purpose is to lock in cashflow. Cash flow is falling short this year. Some perhaps due to weather, but even second half guidance a bit lower than original whole year run rate.

  • cheapstkbuyer cheapstkbuyer Jul 24, 2014 10:56 AM Flag

    They are not executing up to expectations. Ebitda for year now projected at $473MM, while original guidance was $505Mm. Coverage probably even worse than you think, if maintenance capex cannot replace cash flow in the long run.

    One has to wonder how implementing this acquisition will go, given underperformance of last few.

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