i think CHK SWN and CNX would make an interesting bet going forward. All three have been beaten down further than the industry due to leverage. Creating a port of 1/3 each might not be a bad idea. If one fails you could still do ok because the 2 would likely double simply by survival.
I think that after the roll up it has been easier for the market to detect the problem. A firm with 3% ROC that wants to grow at least 6% already has a reinvestment rate that's upside down making the growth entirely financed - which so far the capital markets have delivered. So one question is without the "growth" where does this stand on a valuation basis? Not good IMO - ~$3.5 cf/ 9.5% wacc = $36.8b, less than the $42b LT debt.
Hey Joe - Fellow long here as well. Don't follow it closely but its nice to see that operations (combined ratio) are getting better. On the inv. income side I see around ~2.3% off $4.5b looks like the safety of AAAs and Treasury's is the primary investment choice. Maybe better operations they can widen the investment yield. Also I wonder if the 2020 2% convertible notes might be a temporary overhang on the share price?
You make interesting points, but madoff? When his scheme came to an end there was something like $3 in assets per $100 from investors. Anyway's this, on the other hand, still produces cash from legit operations. With that said there was a time when if KMI dropped significantly (mostily prior to the LBO) it was time to add. Now I'm not so sure. Back in the day when the KM complex was smaller it could do finance projects that would add synergistic value to existing assets, almost a $2 for $1. Due to size and diversity that intangible has eroded. Size is a big factor here. To attain 10% growth they have to pump in roughly the entire enterprise value of what this complex was 7 years ago. I agree that maybe the financial model is busted. When weighing projects IRR to cost of capital the impending growth rate looks closer to zero. So an extremely leveraged non growth equity could lose chunks of "DCF" with a moderately escalating credit cycle.
Funny that these ceo's who apply extreme leverage, use aggressive or questionable accounting,, or whatever it takes to get a quick run up often use a huge chunk of their stock as collateral. Then when shtt hits the fan their out via margin. And they almost never buy back. Not even a small portion.
I think that maybe KMI (the GP) investor feels the same as well. The roll up abolished the high split IDR which was really an infinite ROC. And it also moved billions upon billions of debt unto the book.
You're right, big picture rules this right now. What good is coming to a CC highlighting operational efficiency? These analyst cover several dozens of other companies, and they know that CHK is simply disposing it's statistical share of cost.
Look at RRC today after they announced a significant asset sale up 10% on a sector down day. Leads me to believe that if CHK can close $1b sale it could jump 50% or more on that news.
I can understand the perception that maybe he could be "playing with house money" to some extent. He and his partner seeded this company with capital that his half returns something like an annual 2800% dividend yield on initial capital. This puts him in a different universe than you and I contemplating whether at 7.4% is a good time to buy.
"MLP" was mentioned at least 15 times in this new article. Did they not roll this into to a single corporate structure last year?
Wonder if this new capital won't be some sort of secured preferred equity. For Buffet it's his type of deal. He gets a solid yield with low risk and maybe upside with warrants. Kinder gets some capital, but more importantly the backing of the Buffet name as a vote of confidence to get the stock back in motion.
Took a look at Nov .50 calls. First, because you can only bid in multiples of .05 you're paying double of what the option is presently worth. Second is commissions, $1.32 per $5 call on 100 contracts. Buying more may scale less in commission, but doesn't guarantee a transaction . Putting your cash at risk shouldn't be so expensive IMO
Sweeten the EH deal with warrants on MHR common. Imagine an A.M press release that half a billion dollar deal is final and what it would do to this stock...Looks like a win/win is sitting on a silver platter.
After the market yawned at his bullish article he opened a bottle of tequillia and took his rage to twitter. IMO