Interesting that the ETP dist coverage ratio was abysmal 83% if I read it correctly. WPZ was at 102%. You kind of get the picture about what Warren is up against, he needs to prop up ETP for a while, until projects start generating cash. Definitely see why he is fighting this, bit off more than can be chewed with the fall out of comm prices. I still think I'd rather own WMB than ETE for the long haul. And definitely two companies. Do think the WMB board is trying to get some cash from him to get out of the deal, not sure that's going to happen.
That is a good point. Just ready for the dancing to stop. The earnings about as expeted, coverage not great. But cash flow is coming on. Still think WMB has a good long term position. Warren is no dummy, he could see the asset quality, everyone wants Transco, but the timing was awful.
“Importantly this year, we won new business in the Gulf of Mexico, placed into service our second offgas plant in Canada and achieved significant milestones on a number of demand-driven natural gas projects. For the
balance of 2016, we expect additional cash flow from recently completed expansions and new projects coming into service in the second and third quarters. Our fully contracted natural gas transmission business coming on in 2017 and 2018 will drive growth in the supply basins we serve.”
Contrast ETE and EPD. Listened to the EPD cc a couple of days ago. They are happy making money gradually with a decent balance sheet and will do an acquisition when it has synergies and is a good value. Disciplined. And they have the Duncan family that's in it for the long term and have let the managers run the company. Have heard that the EPD CEO said the Warren was nuts to do this deal. But if he had pulled it off and with better timing he might have, it would have been the best franchise in the sector. EPD kind of reminds me of Exxon in terms of capital allocation and long term. And Warren is more in the investment banking mode, gotta have a deal. This deal dies and I would bet he is back to another one next year.
I spend a lot of time thinking about WMB/ETE deal because WMB is my largest holding have owned it for over a decade, also WPZ. And ETE and ETP. I don't think I would buy anymore ETE/ETP, won't sell because of the tax implications. I have admired what he has done but your point is right on, I think he is a deal junkie and will not be able to sit still and manage for a while, the merged co is too big. And as for governance, too much power in his hands. He has the wildcatter mentality, they have to be drilling wells even if they are losing money, always convinced that more is better. ETE should do well standalone over next couple of years if prices come back. I would just like to see this deal buried once and for all. Seems today, we are close to being there.
Good point, we have heard nothing about regulatory approval. Think you are right, not sure they are losing much in a stagnant comm price environment. Transco can continue adding capacity without a lot of capital. OKE is selling for close to 12x Dist Cash Flow. Assume $2.50 for WMB and you have a $30 stock. Will see in a couple of hours how well they are doing. I'm not expecting much but just some stability would help.
Deal craters but the conv pref plan goes on. Warren has already made $250mm from the plan, buying units at $6, over what he would have received for 9 quarters. Not a bad deal for him, screws his partners out of $500mm dollars and without the merger, no need for the plan. What a guy.
Yep, move on. I actually think WMB might have better long term opp than ETE, beyond a couple of years. And the CHK issue should be put to rest if oil doesn't crater again. But the tax opinion is a head scratcher, this is the form of the deal from the beginning. Cut and run, and pursue some relief in court if they thin they have justification. Probably could make the case. But get on with business.
Don't think this can be overcome. Transco is the best pipe franchise in the country, WMB will have growth opps for years. The merged co would be too big for an MLP form imo. Will see what operations numbers they put up.
ETE is continuing to evaluate the tax risks referred to above and has expressed its willingness to continue to
discuss the matter with WMB. Further, although ETE is fully committed to meeting its obligations under the merger agreement and using its reasonable best efforts to have the registration statement on Form S-4 declared effective so that WMB may proceed to a stockholder meeting to vote on the merger, ETE believes that there is a substantial risk that the closing condition relating to the 721 Opinion will not be met. Currently, neither ETE nor WMB has an estimate as to when the WMB stockholders are likely to learn the outcome of this issue, nor can either party provide any assurance that the outcome of this issue will be determined prior to the special meeting. If the closing condition relating to the 721 Opinion is not met or waived, and as a result the merger is not consummated, ETE expects to announce this outcome in a press release and file a Current Report on Form 8-K with the SEC regarding the same. See the section entitled “Risk Factors—Risks Related to the Merger—There is no assurance when or if the merger will be completed, and ETE believes there is substantial risk that the merger will not be consummated.”
From the S4, the tax opinion reasoning is weak, this has been the structure from the beginning.
Latham has recently advised ETE that it has concluded that there is a substantial risk that the IRS could successfully assert that the WMB Contribution would not be a transaction to which Section 721(a) of the Code applies based, in part, on the belief that the decline in value of ETE’s common units since the merger agreement was executed has increased such risk. In arriving at this conclusion, Latham considered and discussed with ETE claims that the IRS could possibly assert regarding whether the WMB Contribution would not be a transaction to which Section 721(a) of the Code applies, including the possibility that the IRS would successfully disregard the form of the transaction and, therefore, assert that a portion of the cash consideration being paid by ETE for ETC common shares, which cash will be used by ETC to fund the cash consideration in the merger, may be deemed paid by ETE to ETC for the Williams assets in the WMB Contribution. Latham has advised ETE that considering the potential claims that the IRS may successfully assert and the level of uncertainty regarding the ultimate outcome of these claims, Latham would not be able to deliver the 721 Opinion
were the opinion requested as of the date of this proxy statement/prospectus.
$2.40 dist at 9% yield, $27 unit price. Oil keeps moving and well into $20s is not a stretch. Still think $75 oil by end of the year is not impossible. The whole sector moves up. $60 to $80 oil solves lots of problems.
didn't print, Targa a 9% yield, probably a good comparison although their assets might be better. Oxy CEO said there are only 50 counties where oil is profitable currently, assets do matter. Delaware and Marcellus are probably the two best. Still seems this should be $20 plus at a minimum fairly quickly if comm prices keep moving. FR involvement is plus for growth. Not sure about management but will see.
Just hope the operating nos tomorrow look ok. First glance, looks like OKE/OKS did ok. Right now, still think standalone is better than taking on $6 billion in debt. Both cos would do well. But an all equity deal, need to sweeten it some, is ok but makes takes longer to realize the value, would be a very big co. No deal still seems prudent.
Right now, I hope you are right. I'll take my chances with WMB standalone. The institutional investors could care less about the long term, it's about a few dollar premium. The activists on the board want to sell. I do think WMB is probably worth high twenties at least now if the operating nos don't look awful tomorrow. OKE is yielding 7%ish now, and WMB coverage is not as good but the long term prospects are better, 7% yield on $2.56 is $37, discount it for the coverage and you have a $30 plus stock. The problem with the vote is there is no one promoting WMB's prospects standalone, they can't do it. I'm not sure the small owners will make much difference in the vote. All equity, 2x, that's my proposal, if you bent on a deal. If not walk. And I don't think the MLP form is appropriate for the size of co ETE/WMB would be. Let's hope it gets killed soon.
Listened to cc and if you accept 450mm ebitda or around that. $1.6 billion in debt, assuming the pref shs convert, 75mm units out. The unit price at 10x ebitda should be $38 which would equate to a 6%ish yield, not unreasonable for an MLP covering at 1.6x the dist. And no tax implications for buying this year, so they say. Where are you going to find a 13% yield. And they said spending for this year has already largely happened, no need for equity raises for a couple of years. As soon as the analyst start talking it up, it should move.
Could be, my opinion changes weekly, does seem the market is believing today that deal is on. The rest of the sector is down as is ETE. I am guessing WMB operating no out tomorrow will point to a higher WMB stock price, won't be great but will support higher stock price. And I do suspect that Warren wants this deal to be done with all equity, and that's just a guess. Warren wants to grow his asset foot print and still thinks Transco would help him connect the US shales. He is shrewd if nothing else and bent on growing, a deal junkie.