Share price will probably do much while 2017 oil is trading in low to mid $60s. Cashflow will dip some under that scenario, and distribution will not likely change much. Yield below 10%. No room on credit line to do much.
So, collect the distribution and hope oil goes higher.
With BBEP you have to worry about DCF going to zero at today's price curve.
I don't see the hedges as much of an impediment to the price going up. There is a lot of unhedged production in future years, so value will go up or down with oil price curve.
Certainly hedges did not keep any of these from dropping 75% when oil fell, so the same should hold in reverse.
Plus it's not convertible for 3 years except for certain circumstances. Not sure what those circumstances are. Haven't been able to find the details in SEC filings.
They get $.60 on the preferred, which higher than the current common distribution of $.50. So, most likely they sit with it for 3 years, and after that converting will depend on common share price and distribution rate.
So, Robert's comment was totally absurd.
Over $6 less than 24 hours after you wrote that. Have they really set a hard limit at $0.50 for 2 years? I am sure it depends on what happens to oil.
I think .50 most likely for a while, but not set in stone. Would need a pretty good rally in oil and perhaps a bump up in the borrowing base, and then they might start increasing it. If 2017 futures get to $70, then investors can start factoring in $1+ DCF/shr on a more permanent basis and we can move close to $10.
Definitely a lot of their big moves have not worked out well since going public.
These are not buy and hold vehicles for income, as many have hoped they would be.
Rlbeard, if you are still in the aquisition mode for BBEP, you might want to look at MCEP as well. Should generate more DCF/shr at in 2017/18 and beyond with less leverage. Possibly worth a tax loss on BBEP (which I did some of).
I did buy a little CLDN and sold 20 calls. We will see how it goes. Total spec for me.
You have to factor in debt as well. If you look at enterprise value (market cap + preferred + debt) / adjusted BOE, you will find that Mcep is less.
In the end it comes down to how those reserves create DCF/share. That extra debt and preferred stock expense weighs heavily on bbep's cashlow. Which is the basis of how much distribution can be paid. On that basis mcep looks superior at the same oil price.
BBEP does have better hedges which helps them a bit over the couple of years, but I think both will pay $.50. BBEP dcf/shr not much better now, if at all (after latest $1bil recap), despite the better hedges.
MCep does have more risk right now of the banks lower the credit line below their borrowings. But MCep's was recently redetermined at these low oil prices. Ok for now and paying some down this year.
Where do you see 10 year life? Reserves are 23.2 and this year production estimated 1.51. Reserves/production = 15.3 years. I believe BBEP around 15.5-16 on same calculation.
Both state proved developed as 77%. So, the same there.
MCep reserves 95% oil while BBEP is 55% oil. Nat gas and ngls sell for less than 40% of oil/boe. So, those reserves are worth much less.
But you are to the extent making direct comparisons can be difficult, since many factors affect value.
I did a small amount selling the 20 calls. All in around $10.60, but more upside then with $17.50 strike. Share continued down right after I did it.
Small trade for me, because not much expertise in evaluating probability of success in biotech trials.
By the way, if you are still buying Bbep you might want to look at Mcep as well. A bit different and much smaller. But less leverage and lower oil price needed to cover future distributions.
Might put a few chips on it. I assume the prelimary results mean greater than 50% chance of something positive coming out of this stage, in which case the bet would make money. I also assume that a very negative results will kind of being like the Titanic hitting the iceberg.
Interesting. I guess it comes down to probability of a successful trial Tesult and how low it goes if unsuccessful. Any opinions on those probabilities? It would be a pure guess for me.
I looked at reserves divided by production to estimate life. I don't have the numbers with me, but it was not a big difference. Maybe slight advantage BBEP.
Costs and what markets you sell into are other factors. Fairly complicated, but my analysis agreed that mcep was better value. I own both and have owned some BBEP since 2008.
Not sure if some missing factor, like mcep relationship with their former owner.
BBEP seemed to do okay until Postle aquisition did not seem to perform as expected and QRE was ill timed and maxed out the credit line and leverage.
Mcep seems better situated to produce more DCF/shr under most price scenarios. BBEP might gain if nat gas way outperforms oil. Oil has advantage of global market with growing developing world demand and possible geo political causes supply disruptions. Nat has will be helped when exports get of the ground (Msu take years).
One difference is that BBEP has a lot more nat gas and ngls reserves than mcep. Those are worth a lot less per BOE. I assume they are worth about 40% of oil on a boe basis. That might even be high.
Using that assumption, mcep about 20% cheaper enterprise value (market cap + debt) per adjusted BOE vs BBEP. And less leveraged, so less risky.
BBEP senior debt plus preferred is much higher interest rate than mcep is paying. Some advantage though to those being fixed rated and not subject to periodic redeterminations.
Didn't they just do a lot of acquisitions in last 2 years? Problem is oil price , not reserves.
Realistically they don't have a lot of room to buy. Maybe $250-350mm, or perhaps a bit more if banks increase the line some with a new asset. Not smart to max out credit line (as we have learned twice now). Can't just keep increasing debt. Leverage too high already, and equity not a good option.
More realistically hunker down time. Cut costs and pay down some debt.
Accretion does not always work as management says. Every BBEP deal was supposedly accretive, but look where we are today. Their definition of accretive is year 1, with just credit line financing. Of course, over time equity is issued to balance leverage and production depletes.
So accretive, doesn't always turn out to be accretive in the long run.
Futures around $62 in 2017. So, they could lock it in if they wanted to. Hard to want to lock in these prices, but maybe a floor or collar.
BBEP won't cover distribution at $60 in 2017, as of now.
Thanks, I'd did switch some BBEP to Mcep. Will probably do more.
MCep seems better able to with stand low prices, and less leverage. Even at $50, with no hedges, they might generate some positive DCF (not enough to cover $0.50). Below $50, I think all these are pretty much sucking wind.
Probably around $58-60 non hedged to cover $.50?
Some concern about little room on the credit line. Hopefully it does not go lower, since it was just revalued at low oil prices. Might have been better buy if it went to zero and they paid down even more.
Thanks, but I meant ebitda for mcep. I am thinking 70-80? I am a regular on the BBEP board, where I saw your post. MCep does look better on an equal hedge basis. A little worried they don't have much room on credit line, but hopefully they can live within it.
Thinking of moving some BBEP into this as well.
Wish they had a bit more breathing room on the credit line.
What is your ebitda estimate for 2015?