Agree, seems DNR is a good bet at $5+ over the longer term.
The Iran deal is done, I guess, don't know exactly what it provides for, kind of like the Greece bailout, a media event. Going to take a while for the barrels to reach the market.
I would guess that about now is the time to make e and p bets for the next couple of years.
The MWE deal, MPLX up a couple of dollars, the sell off yesterday didn't make much sense, the combined co will grow 25% per year for a few years, will be hard to find another co that can match that growth, ETE/WMB can probably do it. Will see if Phillips is going to make a run at WMB.
The $78 is based on MPLX closing price yesterday and it's down 15% or whatever today. Looks like the growth rate going forward is about the same as the rate before the deal. I would guess today that they are both undervalued. Someone mentioned the arbitrage play and that may explain it. In that case, either should be a good bet. If the deal falls through, MPLX will still have a 25% growth rate. If someone else comes in, both will appreciate. If the deal falls through, unlikely, then MPLX is the better bet. Today, I think I would just buy MPLX.
bison, you get 1.09 units of MPLX and $3.33, MPLX is $59 now, so the MWE value is $67 plus. You don't get $78 of value. Still don't understand why MPLX was down so much, before the deal analyst had a 25% growth rate for a few years out and it is still 25%, so MPLX shouldn't have taken that big a hit. I don't know MPLX that well but it could creep back up. Might have something to do with arbitrage but $10 seems too much.
chump, it's always hard to drive a stake in the sand and stand by it but $13 for Bonanza feels like a great value. But then again, e and p values are driven by the commodity price and reserve potential, the latter is a lot easier. It seems obvious to me that volumes have to start falling off but the market doesn't seem to buy it. The consolidation in the midstream sector has started, Marathon buying Markwest today, Williams by ETE. Seems we should have some deals in e and p. Unless the majors think they have all of the shale inventory they need.
Not sure MWE is up for sale, someone could top the bid, might happen. But MWE got a good deal, they are continuing to run the company, and a larger company. Problem with offer is that it was based on the currency of a smaller co with a bigger growth rate. But then you have a significant drop down inventory, $1.8 billion ebitda. MPC is up big today and MPLX is down big. Bottom line MWE is up 13% or thereabouts dividend is cut in half but growth is doubled. A $60 value growing 25% for the next five years, gets you $180 unit value plus 3% yield per year, close to $200 value/$60, 230% return. Assume $60 unit value,13% growth and 7%, unit value of $110 in five years, plus 7% yield annually, 120% total return. Numbers are rough but this is a good deal long term. If a company with mediocre growth had made an offer, it would have taken a bigger premium.
This seems a great combination, might lose 4% in yield but growth doubles from low teens to mid 20% range. Current total return 13% growth plus 7%, 20% total return and now 25% growth plus 3% yield, 28% total. MPC has as they claim $1.8 billion of ebitda to drop down. Could have been worse, a c corp buyout, and as one comentator said, could still happen at some time in futhre but now you have a $30 billion EV company that could be $50 billion in a couple of years after growth and drop downs, not many could buy it. The risk would be MPC, a la, KMI. But seems bottom line, probably helps prevent that from occurring, the size deterrent. And years of 20% plus growth. And MWE execs are still running the business and they seem to be well regarded. Plus synergies based on geographies.
Birdog, I would be very surprised if the ETE deal doesn't go through. Phillips could do it, bigger co, not much debt, synergies. Their yield is in the twos, could probably beat the ETE offer, WPZ would remain, tax free exchange. I would take a $84 Phillips offer, which would probably settle out in high $70s. And Phillips has publicly stated that they want to grow the midstream and lessen the impact of refining. Have always stayed away from refining but it could be a good business for the next few years. They have a good chemicals op, Chevron partner. Seems they could bump the ETE offer a few dollars. Don't know how it would play with DCP which is half owned by SE. It needs to be solely owned. Could merge it with WPZ. Might be a way for WMB execs to keep their jobs, they would be an improvement to DCP, imo. More I think about it, would be a good deal, but think ETE might be the better long term combo. Now with the Marathon deal, puts pressure on Phillips to do something. MWE execs got a deal to keep their jobs. I'd take one for one PSX today. $84.
That was a midstream deal. No one would want ARPs assets. A $2 value after they cut the dist, might be a good bet, but you still have Eddie and Lee. Used to think Cooperman was fairly astute but not when it comes to e and p. His SD bet was a disaster, and averaging down on this, he might have it as a private bet after they cut the dist.
The Marathon merger looks like a good deal for MWE, MPLX owners aren't too crazy about it, down signifcantly. MWE growth goes from low teens to mid 20%. Lots of drop down opps, $1.8b of ebitda that Marathon can drop down. At 10x, that's $18 billion of addl value, going to be a big co. Wonder if this puts pressure on Phillips to buy Williams. Phillips could offer one for one stock, $80 value and probably would look like a good combination. Would think this makes Williams more valuable. Also, OKE, TRGP, SEMG, PAGP should be in deals in next few months. The window should be open with low commodity prices into next year.
I would bet ARP is down to a $2 value before commodity prices rebound. Best move now would be to cut dist to zip and operate for survival. At least it's better than an ATLS bet. Cohen and Cooperman deserve each other.
Agree, the China situation is a real issue. Imo, Greece is a media event. Both sides have to reach agreement. If demand holds up, Boone sees 2 mmbs/d growth next year, $60 oil isn't enough to supply the globe. What happens this quarter, who knows, but most see it coming. If I was a major oil co, I would be buying as many of the top tier shale cos as possible. Somewhat surprised more hasn't happened. DNR could be a target at $5, probably private equity. I optimistic, but then again, I am almost always in that camp. If the rest of the world can keep it together, China first, then the shale revolution should continue for years.
Marathon merging MWE into their LP. A 30% premium. Probably a good deal. More to come. Wonde if Phillips is looking at WMB, that would be a good possibility although ETE still looks like the best combination. Just a matter of time before OKE, TRGP, SEMG, PAGP.... The Marathon deal moves the refiners further into the midstream area.
Bison, I think WPZ is trading like the ETE deal will happen, if WMB rolls up, you have a $55 WPZ value assuming WMB falls back to $50. I don't think the roll up happens but probably won't lose anything if it doesn't. Your mention of crisis moves, seems since 09, most want to prepare for another crisis. I kind of think it could be another decade or more away. Guessing that just focusing on companies that can grow consistently for years and coupled with a low interest rate would produce fairly good returns. As for interest rates, I sense that Yellen would like to see long term rates begin to rise on their own and she would follow suit.
cbd, I have decided that almost anything Permian is probably a good buy, not going back to any high debt cos though. PXD, FANG, CXO, XEC, OXY, APA, DVN, MTDR.... CLR seems it should be a good bet on Bakken and OK. EOG for everything. The decline in BCEI doesn't make sense to me, time will tell. If it stays near here for long and if I have funds, would buy more. The equilibrium price may be less than it was but $60 won't cut it, imo. Again, time will tell. Wonder if PDCE will make a run at BCEI, probably should, could pay a big premium and still have a good asset.
Bought some BCEI, $13s seems an irrational value if you believe in $80 oil. But you could say the same with a bunch cos today. DNR in $5s is a great buy. Buying Boone's argument that the world will need 5mm b/d of new supply to keep up with demand. 650 US oil rigs can do it. Problem with irrational values, they sometimes can get more irrational.
chump, cbd... have been trying to wait this quarter's swoon that all are expecting, but decided to buy some BCEI today. In the $13s, seems somewhat irrational. Back out Ark and you can buy acreage at $14k per acre for one of top tier shale plays in the world and 25k b/d prod. Listened to Boone yesterday, while he is not infallible, he stands by his $70s call by end of year, and said if he misses it, will probably be on the low side. Seems the whole universe is almost assuming the US shales can supply the globe at $60. He presented the nos, 50mm b/d outside of US and OPEC, 6% decline, 3mm b/d needs to be replaced. 645 rigs can't do it. Iran barrels if they come back will be next year. He sees 2mm bs/d of demand next year. That's 5 mm b/d that have to be added next year. Most analysts have a $30ish target for BCEI. Not sure what is causing this disproportionate move. If I didn't have so much tied up in Williams and don't want to sell any until the deal with ETE is finalized, I think I'd be buying more. I'm not sure we see much movement until the prod vols start coming down, this week it was down 8k, not much but going in the right direction. Looked at nos on new discoveries around the globe, there is not much being found outside the shales and the majors have an abysmal record in terms of finding cost,s adding volumes. I almost hope I have more funds in the next couple of months if we retest the $40s. Still think it will be short term and that $60 won't come close to supplying the globe. Still think patience will be rewarded.