Drilling partnership came in at $150. And they gave a pretty wide range for 2014 guidance.
I'm thinking that represents more operational issues at APL than they publicly discussed. The ARP release seems pretty much as expected with the exception of the 150MM and I was surprised no further activity in Marcellus given their previous comments.
Its on Business Wire.
Disappointing with only $150 million for the drilling partnerships. But not surprised given the distribution.
Said weather impacted by about $3 million of EBITDA.
Dividend coverage was 1.0 for the quarter.
$38 million of asset impairments - some of it expiring leases which is part of the business - other part not too clear - assume economically unviable leases.
Gave some more detail on GeoMet production - looks solid.
Hopefully they will expand on the plan going forward for the drilling partnerships. We are well below the levels they spoke about only a year ago. Believe at one point in time they felt potential for over $200 million and eventually $250 million a few years out.
Looks like it got cut off - here is rest;
build-out of assets, meaningful amounts of ethane rejection, and the need to
bypass gathering volumes to third parties has contributed to compressed
margins and lower cash flow. We view execution and volume risk associated with
the development of Atlas' Eagle Ford-based assets as a key credit
consideration during the next 12 months.
The negative outlook reflects our expectation that Atlas' key credit measures
will remain weak in the near term. We could lower the rating if low commodity
prices, stagnant throughput levels, or operational difficulties result in
tight liquidity and/or debt to EBITDA above 5x through mid-2015. We could
revise the outlook to stable if Atlas successfully executes its 2014 growth
strategy, maintains adequate liquidity, and reduces leverage below 5x for a
The following is a press release from Standard & Poor's:
-- We are revising the outlook on Atlas Pipeline Partners L.P. to
negative from stable.
-- We are affirming the 'B+' corporate credit rating and 'B+' senior
unsecured debt rating, with a '3' recovery rating.
-- We based the outlook revision on Atlas' lower cash flows resulting
from low ethane prices and some construction delays, leading to our
expectation for high financial leverage over the next 12 months.
NEW YORK (Standard & Poor's) Feb. 27, 2014--Standard & Poor's Ratings Services
today revised its outlook on Tulsa-based Atlas Pipeline Partners L.P. to
negative from stable. At the same time, we affirmed our 'B+' corporate credit
and senior unsecured debt ratings on Atlas. The recovery rating on the senior
unsecured debt is '3', indicating our expectation for meaningful (50% to 70%)
in the event of a payment default.
"We based the outlook revision on Atlas' lower cash flows and higher financial
leverage than we previously expected," said Standard & Poor's credit analyst
Atlas' underperformance is primarily driven by continued weak ethane prices
and slower-than-expected volume ramp-up in South Texas (SouthTX). Based on
these challenging market conditions, we are forecasting 2014 EBITDA to be
approximately $50 million to $70 million lower compared with our previous
expectations, leading to a debt to EBITDA ratio of 5.3x at year-end.
Still, we consider Atlas' areas of operations to have compelling drilling
economics characterized by high utilization and strong gathering and
processing volumes across the firm's operating footprint. The partnership
continues to grow at a rapid pace in tandem with robust production forecasts
and we expect 2014 gathering volumes to be nearly three times greater than
2011. Despite favorable drilling fundamentals, large acquisitions completed in
2012 have since stretched Atlas' balance sheet. A slower-than-anticipate
I can't post the article but here are excerpts:
The solid earnings growth bolstered by its diversified well-positioned assets, sizeable high-return expansion projects, and accretive acquisitions coupled with the vigorous hedging program and its continued focus on derisking the operations and financials support a 5-7% distribution growth over the next few years. We, however, remain cautious over its 60% of ebitda exposed to commodities, elevated leverage ratio, and 11% cost of capital comparing to the 8% sector average.
Through renegotiation of its existing contracts and acquisitions of fee-based businesses, APL’s contract mix is likely to improve to 61% percent-of proceeds, 38% fixed fees and 1% of keep-whole in 2014. The company deploys a vigorous hedging program whereby it seeks to protect up to 80% of value for the rolling 12 months. The company intends to reduce its debt to ebitda ratio to 4.25x exiting 2014 from the current 4.9x. The $600 million credit facility along with its ATM program help finance the growth projects and acquisitions.
We expect the quarterly distribution to remain at $0.62 per unit in 1Q14 and increase to $0.66 per unit in 4Q14. We anticipate a 6% growth rate till 2016 and normalize it to a terminal growth rate of 2% over the next five years (our coverage group’s long term average). We use a cost of equity of 11.0% as the discount rate. The downside risks to our thesis come from a decline in drilling in the area where Atlas operates, lower commodity prices, limited access to the capital markets, and regulation and legislation risk. The upside risks include sooner than expected ethane price recovery, more accretive acquisitions and growth projects, faster volume growth, and higher commodity prices.
I would agree. I was surprised that they want to buy the rest of the pipeline. My preference (if the price is good) would be to sell off our 20% to the acquirer and use the proceeds for a new plant.
If they buy it I really hope its at a decent discount. With CVX no longer involved its a riskier asset IMO.
The cash has already been paid!
Basically, they are saying that in 2012 this part of the business was worth 47 Million. Today its worthless.
Its just simply not acceptable. Either the purchase price should have been lower, or the unit should have not been part of the purchase, or they should have lined up someone else to purchase it.
They are basically letting unit holders know they burned 47 Million of their dollars in a year. Sorry.
Its the boy that cried wolf. We are now in 2014. We have continuously been promised more than what has been delivered. Throw SD risk on top of that and you have the makings of a sell-off.
We waited for the expansion projects - they came on-line a little late - growth is coming - Big acquisition - have to sacrifice for a short period of time and then we'll see additional DCF/unit - Then some unexpected things happen - now we are writing off some of the Cardinal acquisition (if you read between the lines because we can't provide the needed capital to the business unit - as we are already heavily in debt - which was the mantra for about a year about how low our leverage was!) - and WINTER came!! And that's the latest reason for not hitting projections.
A coverage ratio of .92 is bad. Depending on SD for volume growth (and lets face it just for ongoing business) is risky. It appears we'll be at this level of DCF for the next two years - and yes I'm sure they will raise the payout by a penny or two a couple of times. Throw in the history of APL and you've got a lot of reasons for concern.
If you like the current yield and can stomach the risk then that's great - but realize that were we are is not where many unit holders believe they were told we'd be.
I agree Dubay is a winner. But he's not the one doing deals. Its really bad that we've already written down 5% of an acquisition that is one year old.
Keep in mind that Dubay is now 63?? How much longer do you continue when your handed overpriced assets? It appears that we would have had higher DCF if we didn't do the last large acquisition - that's not a good situation. Continued reliance on SD is a major risk in terms of expected volumes.
Well hate to say I'm right. APL growth is basically done. Don't know the particulars that are not meeting expectations but all the expansions are fully on-line and we are not close to what they indicated the results would be.
APL coverage ratio this quarter - .92
And that folks, is dangerous territory to be in.
Something is just not right.
All the expansions are on-line. Big acquisition.
And we have DCF coverage of .92? And we are short of where they promised a year ago. And now they promise less for this year.
Is anyone surprised that winter came?
Lot of risk with SD. This may simply be about as good as it gets.
My guestimate was about .06 in the next year.
But I don't want to purchase the CVX pipeline unless its a firesale. Without CVX being involved supply might become less stable. It they get a decent price I'd rather divest.
That is news. Cooperman kept saying that ARP assets were on sale. This would indicate that perhaps he no longer views the assets in the same light - and I have to assume that the continued "next quarter" promises probably wear on him.
I don't know any of the details but the headlines certainly suggest the type of deal we should be doing.
Small, close to other production, and accretive immediately.
Pioneer reported this evening and while they are forecasting about 15% growth next year - they didn't report the kind of increased guidance many thought they might.
I'd just point out that expectations kind of keep creeping downward. I'll be happy if we hit .60 a quarter by year end. APL hasn't executed the plan that was laid out and we haven't seen the increased DCF promised - did some unexpected things happen - yes. If Pioneer starts to slow and we still rely on SD drilling plans - that's a lot of risk. And keep in mind the CVX pipeline is for sale - I hope we aren't the buyers unless its a gift.
ARP - we overpaid for coal methane instead of sticking to the slow and steady small acquisition and have paid the price in terms of lower unit price and that greatly restricts the deals available to us.
I see slower growth that what has been promised. NG futures above $4.50 would cure a lot of ills at ARP but we are a ways away from that. But the recent surge of NG demand should begin to impact futures if inventories continue to be below normal. NGL pricing has been stronger which is a plus us over time. Time will tell.
I disagree that its about time for this move.
For those that have owned atlas entities for a long time this just smells of yet another "lets be smarter" type move that does nothing for the actual execution of the business. Too much financial engineering and not enough improving operations!
I don't care if I get money once a month or once every three months. What I do care about is a sustainable payout that grows over time. We don't need to keep doing financial engineering - we need to be expanding our production and improving operating costs!!!!!!!!!
That's the spot price. What ARP really needs to see is sustained prices above $4.50 to move the future prices (and help with our latest acquisition which is really only accretive at prices over $4.50 IMO).
We need one more big Artic blast in early Feb and a sustained winter with three or four more snowstorms and we might make enough of a dent in inventories to see a sustained $4.50+ price heading through spring.