The cash you get from the ATLS transaction will be going to Uncle Sam if you've owned for any period of time.
All APL and ATLS unit holders will suffer large distribution/income cuts due to this transaction.
TRGP will increase distributions....... because they basically stole APL!!!
Well the obvious answer is that the bottom is zero.
How likely is that? I don't know.
Folks here don't seem to understand what has taken place. APL was sold for no premium. Zilch. Along with that ATLS divested itself of all APL interests as part of the transaction. In my own opinion - APL was the solid part of the puzzle. The PXD partnership was golden and the assets were mostly well placed geographically. That is gone.
What that leaves is ARP and some assets and some partial ownership of some small entities. So basically all that's left is ARP. ATLS had picked up some assets in the past couple of ARP acquisitions. But no where near enough to allow for much future growth. The units trade at a significant discount to what most people would value the assets as being worth. Why? Well for starters ARP on its own is going to be very limited in terms of acquisitions to grow. The new GP is really nothing more than ARP interests. ARP is a hodgepodge of assets with no clear strategy or plan behind them (and no - claiming that you "time" the purchase of energy assets isn't a strategy). There is no experienced operations executive. Oil and NG prices can fall much further than people think. Solar keeps making strides and while it isn't yet cheaper on its own than oil/NG it is getting closer.
Oh, and ARP has a decent amount of debt to pay off. Look out past the next two years and what does ARP do if NG is trading at $2.45?
The combination of APL and ARP together under the ATLS umbrella had advantages IMO - that is all gone and now they try to "figure out" how to save ARP. What kind of business decision is that?????
I'd tell folks to simply value ARP as a trust and try to calculate its DCF over expected life of assets - BUT we all know Cohen is not capable of simply focusing on operations. SO SOMETHING - No matter how bad that something is - Something will be done. Its just no one knows what that something is - and given the track record - down we go
Well why would you expect the market to be impressed?
We have solid hedges over the next two years. They claim expected coverage next year of 1.1. They also claim they will raise 275MM in the drilling program. I'll believe that when I see it.
APL was just sold for....... NO PREMIUM, and we've gotten (and I assume will never get) no reason as to why. They have communicated nothing (outside of "trust us") regarding the new GP setup and how they intend to grow the business post the APL sale. Dubay was their best executive and he's now off to Targa (or retirement). The past couple of acquisitions were poor in regards to price paid. And Cohen has proven that he can take something good and turn it into something less than good.
At this point ARP is considered speculative and there is a belief that 1. A firesale similar to APL may occur. 2. ARP will simply produce until its assets are expired or NG/oil prices greatly rebound and then sold.
Very few people see ARP as an entity with any direction or strategy or future for that matter.
Realize that our actual coverage was 1.0.
The best thing in the results that I saw was that they added some hedges. I think they should take advantage of the recent bump in NG and get 2015 to 90% NG hedged (if not 95%).
I see little chance of achieving 275 million capital raise in the drilling program. In fact I'm assuming we just continue with our current distribution through 2015 if they intend to achieve a 1.1 coverage.
Nothing great - nothing terrible in the report.
Just something to keep an eye on. Since the Texas regulators have said the ban is unconstitutional its likely to end up in court.
This should be a wake-up call to the industry to be more pro-active around regulations for well construction, waste water, and chemical disclosures. "Average" people voted for the ban - IMO - largely because folks believe you shouldn't be allowed to put things in the ground that aren't disclosed to the public.
Somehow the industry needs to do more around measuring things like methane before/after drilling and being totally transparent in terms of what is being used in their fracking processes.
How about we just set up the new GP and let ARP and the other assets slowly increase cash flow and do the hard work of building a better and stronger business.
I'm so tired of "financial engineering".
ARP needs cash and can't issue equity at these levels - yes, I agree. So lets increase the size of the drilling program and use that cash flow to make a SMALL purchase that will provide further assets to keep increasing the drilling program over the years.
Even if we increase distributions at ARP by a penny a quarter - after two years we'd basically be up to 23 cents a month. Keep paying that out and we'll see our unit price increase to where we have an 8-9% yield.
A BIG part of the reason that Atlas entities are almost always undervalued is that EVERYONE knows Cohen is just looking for the next deal. Lets bring Dubay over from APL and put him in charge of ARP and start building a stronger organization and execute!!!
Then in two years, with a $200+ million drilling program and slowly increasing distributions, and a higher unit price - IF THE SITUATION PRESENTS ITSELF - we make a larger purchase.
Slow and steady wins the race.
No wash rule.
Before you decide to do it you should go back and consider why you bought ARP in the first place.
I've always found with this kind of stuff that when I decide to "be smarter" - I usually end up on the wrong side of whatever happens.
That's stretching it awfully thin.
Just as we can't issue ARP units now, Why sell APL and ATLS when everything is nothing but doom and gloom in the sector?
Of that 9.12 cash I'm guessing the majority is going to Uncle Sam. So I have to strongly disagree with your $46. Its more like $40 and that's assuming TRGP remains at about $125. And that means we get no premium for PXD growth commitments, nor do we get any premium (I'm talking ATLS here) for being 6 cents from the highest IDR's at APL. I don't need Cohen to give me a new step up basis in TRGP - I could do that myself by selling ATLS and buying TRGP!!!!!!!
TO me the whole thing is lunacy and if/when Cohen decides to combine ARP and what's left of ATLS we'll get hit again with a taxable event!
Slow and steady wins the race and we got screwed by panic and being way too fancy.
.64 with coverage of 1.2. The sale makes even less sense. Unless there is some problem we aren't being told about its just a giveaway.
For ATLS holders .64 leaves us just 6 cents from the highest IDR's. And we will never see any of that.
After the street watched Targa fleece Cohen they probably figure the buyout will be about $4 less than the unit price trades for any given day.
The ATLS part of the sale is definitely taxable - I called the company and they confirmed, TRGP is a C corp and its simply a sale of ATLS (what will be left of it) to TRGP at a set price of units and cash - the final value won't be known until the deal consummates. I did not ask about APL unit holders as I own much less APL units.
You can spin it however you want. Distributions going down after a deal is a bad deal. Period. I couldn't care less what the price of the MLP trades at on a given day. The purpose of owning an MLP is the deferred income. NGLS will have to attain more than 35% Distribution growth just to get me back to even on the APL units and I have forgotten what is needed for TRGP - BUT ITS EVEN MORE!!!!!!!!!!!!!!! And that is BEFORE MY TAX BILL!!!!!!!!!!!!!!!!!!! And ATLS had the high IDR's after another 7 cents on APL!!!!!!!!!!!!!!!!!!!!! And PXD partnership growth committed to!!!!!!!!!!!!!!!!! Total BS.
And the worst part is that we PAY COHEN A FEW MILLION A YEAR TO DO THIS!!!!!!!!!!!!!!!!!!!!!
Just another example of America's broken corporate governance system - where mediocrity is institutionally protected and rewarded.
I think the real issue is that APL has agreed upon growth for the next two years with PXD and they have certainly implied there is more to come.
Unless there are unsolvable issues in Texas this is a giveaway. PXD is forecasted to have 20+% growth for a good long while. And they are financially in pretty good shape so this isn't pie in the sky type thing. That combination is worth a premium. It just is.
For long time APL holders it seems every time we get in a good situation Cohen does something to muck it up. We had three solid gathering systems - had to sell two because junior was allowed to play with the toys and pretend to know how to hedge.
Then we hire Dubay and he turns it into a decent organization and we kind of luck into partnering with PXD and things move in the right direction.
Now the purpose of an MLP is deferred income - again unless something went terribly wrong - we have solid distributions and guaranteed growth with PXD for at least the next 2-3 years and implied much longer. Now why would we want to sell at reduced price (compared to the previous 12 month stock price), for a LOWER distribution going forward????
I can't come up with one good reason UNLESS SOMETHING GOT SCREWED UP AND THEY AREN"T TELLING US!
Anyways - I'm sure the deal will be approved and I'll own some NGLS units and some TRGP shares. And I'll cut a damn big check to the government and have a lower income next year. But hey, if Cohen says then..... well I'll leave it there.
If you listen carefully - he starts to say HE"D buy them at these prices - then he seems to catch himself and shrugs and moves on.
The price of this acquisition is #$%$ - plain and simple.
I believe that its TRGP that may expand distributions by 35%. I didn't see anything about NGLS doing that - I thought it was something like 10 or 15%.
And I agree that the deal is a giveaway. APL unit holders that own 1000 units go from receiving $2,520 to $1,822. Plus you get the one time $1,260. PLUS you get the TAX BILL. Which for many long time holders WILL BE HUGE.
The filing posted may be incomplete - but the deal hasn't changed. We are being given away - I mean sold. You get .5486 shares of NGLS and buck 26.
If you own 1000 units you go from getting $2,520 distribution to getting $1,822 distributions.
Plus you have a one time $1,260.
Plus you get to pay capital gains taxes on the sale, PLUS you get to go back and pay normal income taxes on previous distributions depending on how long you've owned APL and at what price you purchased.
Basically, unit holders are getting hammered.
Did you look at the last acquisition ? there was an article on seeking alpha that compared the acreage we bought to another recent transaction - and it certainly didn't look good.
That is simply wrong. There are two transactions. One is APL and one is ATLS.
ATLS holders get cash and .18 shares. So if you have 100 shares of ATLS you will have 18 shares of TRGP when its all done.
And its probably going lower. I know a few traders that feel $70 might be seen later this year - and they expect that 2015 might be 80-90 as the norm. And that's assuming Middle East chaos. Demand is simply weak and production is higher than anyone expected a few years ago.