Again I own both cos but a bunch more WMB than ETE. Warren's behavior should be an issue for ETE owners imo. Would guess he has done his last big deal. Most cos won't even talk to him, my guess.
Seems disingenuous to claim an issue with the tax opinion. They had to structure it in certain way so that it wasn't a taxable exchange, otherwise they could have just traded ETE units for WMB stock, a taxable deal. Your chief legal officer should be gone, along with your CFO. Seems he has played loose with the deal and seems to me a court will side with Williams. We will find out.
You would think so, that would be a critical issue, in every deal. The chief legal officer saying a light bulb went off, what the hell does that mean. But I don't know the reasons for not producing one now. Thought maybe the cash portion is a much greater piece than initially. That issue doesn't smell right to me but the firm they are using is a major player. Seems to me Warren is playing too close to the edge and a judgement could go against him that would be a big number. But I'm not a lawyer. The conv plan seems an easy one to me. And he claimed over and over on the call that the deal will not close without the tax opinion. Guess the question for me now is will he let it get to court or will he offer something. The longer he goes, seems the higher the number. High stakes poker?
Absent the management issue at ETE, Warren, with gas fundamentals still looking good and $60 oil probably on the horizon, the combination of the ETE and WMB could be a knock out in a couple of years. But you can't overlook the Warren factor, unfortunately. Still think it dies, I sense WMB board doesn't want to hook up WMB owners to Warren, but they want to extract some cash before he caves. And both cos do relatively well.
Have been traveling and jus read the report of the vote, trial dates. I still don't think this gets done but the lawyers would have a better view. The trial starts 6/20 and the vote is 6/27 and Warren says the deal won't close without a tax opinion. I would guess the conv pref plan WMB wins, how does he get rid of it. Will the court deal with the tax opinion, would think not but it may be part of WMB's claims. I guess I don't know enough to reach a conclusion. Seems Warren would cough up some cash to WMB and not run the risk of a ruling against him, that could be a big number. Will have to watch for any analyst comments. I'm not selling either company so it will be what it is, still think they both are better off stand alone. Just heard GS Currie talking about strengthening of nat gas, which would be good with a related oil recovery.
This one will be hard to trade, return will come from holding for couple of years, growth 60%, 40%, 40% through 18. You can't find another MLP that has that growth profile. It might trade down to 2% yield, $42 but would imagine it trades in 3% yield range. With the growth, dist should be $2.20ish end of 18, at 3% yield, $70plus unit value. Even 4%, $55. Seems this is a good bet in the MLP sector, although most want higher yield, this is a growth story and long term hold. And no k1 and tax deferred div through next year at least. And seems they have a more drop down opp which would boost the value. Buy and forget is my advice. But most want to trade.
Still think this will move up slowly to $30 range, an 8% yield with 150% coverage is not unreasonable. Oil price should get back into $60 plus next year. Wild card is interest rates, not sure even the Fed can do much to boost them but that could be the head wind for the whole energy infrastructure yield plays.
Unfortunately for him, he doesn't have the currency anymore to do another deal any time soon. I think he really wants to do everything a major does except e and p. Seems Spectra would be the next best bet but they are yielding 5% and he's at 9%. Marathon would be a good fit for gas outlets, the App midstream, logistics with SXL. Again you need a strong stock currency and ETE needs to recover. Probably going to take through next year to get there. And Transco will continue to grow and g and p will come back with $60 plus oil. ETE could be $20 by end of next year but still not the 3% yield he had. Not sure it gets there again but you never know.
He doesn't even have a board to answer to, accountable to the GP and the sole member of the GP is K Warren. Too much power in one person. He wanted to create a midstream super major, and he might just do it. But don't think with WMB assets. And I still think he'll have to have a NE pipeline. Not going to get KMI's, Spectra, too expensive. Looked at TEGP, GP of TEP, they own the REX pipeline plus Pony, bought iw a few years ago when the flow was west to east, now moving gas west, think eventually Marcellus/Utica gas will extend to the West Coast. You need that connection if you are going to connect the whole country. Still think Transco will create growth for WMB for years. As for TEGP, only yielding 4% ish but will grow 60% this year, and 40% in 17 and 18. By far the best growth rates in the sector, and there's another 50% of REX to drop down. And the div is tax deferred for at least a couple of years, they are taxed as a c corp, no K1s.
It does seem like a great franchise, I listened to the cc, they think REX could deliver over 6 bcf/d with complete bi directional flow. And Pony is a great asset. And considering they can drop 50% more of REX, plus wonder is PSX would divest there interest. Drop downs would boost the projections further. And they mentioned that App gas could eventually be shipped to west coast. 60% increase this year and 40% in 17 and 18, what's not to like. Seems investors are drawn to big yields right now but this could be a good long term bet. Thanks for pointing it out.
And the chief legal officer said a light bulb went off concerning the tax opinion, I bet it did, and he remembered Warren bailing him out.
Wasn't that the chief legal officer, had forgotten that. What other co could get away with treating it like their piggy bank. Would say I hope he has to pay up to get out but I own ETE/ETP as well. Would like it go go away, maybe the $500mm that WMB paid to WPZ would be enough. Don't see how he wins the conv pref plan in court but who knows.
So the move now, expectation that WMB will get damages from ETE, or that deal is forced, value high $20s, or WMB's prospects stand alone.
Think I'm with you pj that their prospects are better stand alone. I don't trust Warren anymore. Most don't think it will affect his future dealings, but I'm not so sure. I think a lot of the analysts were surprised at his conv pref plan. Integrity does matter in the long term, imo. Although our culture doesn't seem to value it as much as in the past.
miz, saw your mention of Tallgrass on the ETE board. Haven't looked at it in a while. So if TEGP did 80 cents annualized for q4 15, they should do $$1.20+ q4 16 and if the 2x growth rate for TEGP holds for 17 and 18, TEP grows 20%, TEGP grows 40%, not sure the same multiplier applies, level of IDRs?, then TEGP would be at $2.35 by q4 18, $47 unit price, a double in less than two years. Is my math wrong. And like the fact they are taxed as a c corp. Are the dividends tax deferred as i the case for PAGP.
Fwiw, Boone say oil could be $50 to $60 in next 60 days. He hasn't been that accurate so far, saw $75 end of 15 but little over 300 rigs down from 1600 is remarkable, even with the efficiency gains. $60 in 60 days would drive all of the midstream sector up. I own a bunch of MLPs and so far, CEQP is the only one that has cut the dist so far.
Good luck, I own WMB and ETE as well as WPZ and ETP so have a big interest in how that combination plays out. Today, it feels as if the worst is behind us in terms of oil price but I will never claim to be a good price forecaster. It does look like US volumes are falling faster than expected. Don't know about the ME and rest of world, but I would guess the worst is over there. Will be interesting to see how fast US drilling comes back, everyone claims they have $50 profitable wells. As I mentioned PAGP sees $60 avg oil in q4. ETE is a good company and so is WMB, maybe longer term, but doesn't see that taking on $6 billion of debt in this environment works so standalone makes more sense.
CEQP along with the whole midstream sector that is more commodity sensitive should continue to improve. Range buying Memorial for Haynesville gas, positive. Oil could be a lot higher year end than most expect. $60 to $80 next year not out of the realm, activity picks up. Seems CEQP in $20s is easy call.
I think I agree with you but think about buying WMB shares with cash that yield 13% with debt that costs 5%, admittedly for a couple of years, if you sell something to get you through ETE DCF at $1.40 next year at 15x multiple gets you to $21 value, not too far from where we started. I don't see how they get beyond the tax opinion, the law firm can't afford and will defend it forever, and it is an opinion, you appear to be a lawyer. And the other stumbling block is it will never go to holders for a vote with the conv pref plan. If WMB wins that, you still have the tax opinion and don't think WMB board can recommend. As for Warren, i won both cos, a lot more WMB than ETE and I don't want the MLP form for a bigger co, and Warren's leadership. But I would guess that the ETE owners will do well. As for more deals, investors have short memories when it comes to their greed. I would bet he is back in the deal mode next year. Interesting times.