ETP needs assistance for a while as he says to get to 17. Warren diluted units with the conv pref plan. LNG will take capital. It's not a cake walk for ETE. The ETE MLPs will do well with recovery of comm prices and so will WMB, would argue WMB has a better long term outlook with the Transco asset, that's what Warren wanted. Transco can't be replicated and will give them lots of bolt on opps for years. WMB will roll up WPZ and the cost of capital reduction should give them advantage as growth comes back. The merged co would have been a powerhouse but they will both do well if nat gas growth continues with some help from shale oil.
ETP Distribution coverage for the quarter was 0.86x (3rd straight quarter below 1.0x).
OIl rigs down to 322, my guess was 600 bottom. Listened to PAGP cc, they probably do the best in tracking vols and their forecast for the year was based on a bottom of 500 rigs. And they believe the reduction this year in the US will be double what they projected. The longer this goes, the more pronounced the price upturn will be. EOG now claims that they can make a 10% return on their wells at $30 per barrel, that's competitive with the ME. We could see $100 oil again in a few years.
tracey, actually you were saying it before I did. At first, I thought it would be a good combination of assets, absent the balance sheet issues. And now, I don't want to partner with Warren even if they offers all equity. Not going to sell ETE or ETP but it will interesting to see how long he can sit still before trying to buy someone else. He's a deal junkie and will keep doing them until he goes over a cliff, almost did it with this one, if it is truly over, and it appears to be. The lawyers get a big payday to mop up. King of think WMB might get something out of it maybe the $400mm they had to fund WPZ.
pj, I own both. Have owned MMP for over a decade and has been the best MLP in the sector, solid growth with fee based rev, little comm exposure, and a great balance sheet. Also own OKE, has 130% coverage of the dist and no big financing needs, another good co. I would expect, maybe it's hope too, that WMB will catch up to OKE's valuation after the ETE deal is put to rest. WMB used to track OKE generally. Do think ETE value is probably $15ish until the line of sight to increases at ETP kick in. WMB at $2.56 div and OKE's DCF multiple, gets WMB to low $30s. Still think the deal has kept ETE and WMB down more than they should be. Time will tell. I sense WMB has a plan to simplify which they were going to do with WPZ and probably sell some assets. If they got back on track with $2.56 div and maybe 5% growth post WPZ roll up, no reason why they wouldn't be back to $40s.
My guess, he doesn't want the deal with cash but would do it all equity and probably first choice is to go it alone. I think the shale growth will be there but it's going to take a while to come back, although that could be next year. Lesson learned for MLPs, you don't want to get caught in expansion mode and dependent on the capital markets when the bottom falls out of the commodity price, one's like EPD, MMP... are in a good position to weather it. Balance sheets don't matter as much in hyper growth.
old, what's your take on the tax opinion, the comment by the chief legal off of ETE seemed awkward, light bulb went off, just discovered few weeks ago. Seems if my lawyer came up with this development now vs when the deal was structured and I wanted the deal, he would be gone. Just seems too convenient. Any guess on litigation, assuming the deal doesn't close. Also Warren said conv pref plan is intractable. He set up the plan for a deal that won't happen and he makes $250mm so far on the plan. Seems like another lawsuit opp.
You're probably right, the 86% coverage no doesn't look good now buy by end of 17, dist growth could be. I own a bunch of ETP so I like that prospect. But Warren will do what it takes to support ETP with ETE cash, IDRs, whatever it takes. Does make sense that he doesn't want the WMB deal but kind of feel he has stepped over the line, the conv pref and now the stance that the tax opinion, the light bulb moment, that's a weak position imo. They have been looking for ways to kill it. Guess it doesn't close but litigation for a while.
Warren even said today the deal won't close even with a positive shareholder vote, how does that happen. This has to be one of the weirdest mergers ever. Probably attributable to his gunslinger mentality and he no one to answer to, he is the GP. I was encouraged with the WMB call today, they will be fine as oil activity come back and hat gas demand grows.
I would guess that WMB will maintain div at $2.56, probably sell a couple of things. What is a $2.56 div worth with a co with decent long term growth prospects. Assuming no growth 8% minimum, $32 per share. Get back to some growth next year, 6%, $43 stock price, what a strange ride this will have been. A clearer line of sight if the deal is killed in the next few weeks. I would bet they already have Canada teed up.
So says Warren today, probably right though. The conv pref plan stays in place and he elims or reduces the ETE dist to prop up ETP.
The merged co would saddled with $6 billion of add'l debt. ETE will never pay $2 billion, that was a rumor. Best WMB can do in the merger is all equity and guess the WMB board won't do it. ETE CEO says he won't close because of no tax opinion. Seems the deal is dead today if it is not restructured and I don't think it will be.
CHK sold $500mm of Stack acreage, 42k acres. Goes along way to paying the 17 maturities. Seems that bk prospect has been eliminated. Standalone WMB looks good long term, just need to kill this deal.
If the merger happens, it will be and they indicated on the call that it could be to prop up ETP. No skin off his nose, his is still paid, with a premium kicker, he has already made $250mm more than he would have over the next 9 quarters.
I think Warren would take the assets at a 1.87x stock exchange. Seems he has already crossed the line with the conv pref plan which he says will not be rescinded and WMB won't let it remain. And Warren says it won't close no matter if there is a vote because of the tax opinion where the WMB holders would take the tax burden and ETE would get a stepped up tax basis, seems a good result for ETE. Bottom line is he is reneging on the deal and found lawyers that give him a way out. Now, he waits to 6.28, vote or not, and says its terminated and lots of NYC attorneys make a fortune in fees on both sides, the real winners. Not sure WMB is losing much waiting, they probably cut more costs than they would have without the prospect of merger, 10% cut in employees .... Will see what tomorrow brings.
Part you are missing is he and his cronies got value of dist while the dist was eliminated for everyone else. So how is he taking care of you. He's buying units at $6.56 after 9 quarters. He took care of himself and cut you dist.
Something doesn't smell right, what changed from 9/28 to now except ETE is $13 instead of $23. At some point he's going to overstep. Lawyers are like doctors, there are differing opinions I guess but for ETE to say a light bulb come on, seems a little lame. What changed?
Don't know how to do that, let's just communicate on this board. Still listening to the cc and I really can't believe Warren and his cronies. There is no way I want to be partnered with him. I'm not sure there's much more that can be said, he definitely said the deal can't be closed even if WMB owners approve it. And the conv pref plans stays in place. Seems this is one of the risks with MLPs with the GP in control and not much the limited partners can do.
Warren just said on the cc that the conv pref is in place and can't be rescinded. Unbelievable, not the type do leader I'd want to be partnered with. He's buying units at $6.56 with his deferred payment over the cash he receives and the common holders could get zip for awhile. Beyond the realm.
Warren set himself up to get his dist if the deal doesn't go through and may still cut further the ETE dist to support ETP. He's made $250 million on the conv pref plan so far. What a great partner, riding the backs of limited partners.
Again, just listened to Mason, ETE chief lawyer, said they were perplexed and just figured it out, the light bulb moment. Also said the convo pref deal is done, Warren just made $250 mm with the plan, what a guy.