True statement about uninformed investors selling now, the informed investors bailed a long time ago. And survival speculators on the buy side.
Subtle hint, 50% yield for informed investors. A $2 value is an option value on survival or something good happening, micro or macro. Micro, lots more bad things can happen. Macro, oil could rise, I think it will, $70s end of year but that may not help gas prices. Or oil and gas say $60/$3 for years. Even Cooperman threw out $70 oil and $3 gas forever, asked Eddie to respond to that question, whether that would be enough, no answer from him. The hedge book is over $3 per unit, so informed investors must see something or better put, the lack of something. They only have one asset that's profitable at current comm prices, and it's too early to tell, 20% returns is all I heard, no type curves, production issues that are temporary. And they are giving away million a month in dist's. Someone make the value argument with some data to back it up because I don't see it. A $2 option value, a speculation is about all I see and it doesn't look that strong. Some of the e and p s with high debt are in the cents per share range. Oil will go up again someday is not an investment premise. Negative posters aren't to blame, look in the mirror, but that would require a rational person. Investing takes average intelligence, some emotional maturity, a long term view and the harder you work, the luckier you get. Current price is a speculation, not enough there for investors.
Who knows how to value the units, dist will be adjusted. EF play, not much known, no type curves, expensive wells. Drill partnerships, who knows how much they do in December, would think it's not a good market. Dist each month could pay for 1.5 EF wells. AGP makes no sense, ATLS makes no sense. Eddie still in charge. Whole MLP e and p sector is questionable. Having said all that if they do the right things, elim dist, merge cos, they will survive if the EF wells are viable. Not a good start with frac interference or whatever it was, not sure their credibility is that great. Based on their history, will probably turn out to be something else.
But most on this board just want to attack others and keep a closed mind and appear to be lazy. Just assume that what Eddie says is wrong and go from there. And Cooperman's questions were soft balls, hard to believe for someone who's lost $100mm on this bet. Another lesson, don't follow the gurus and definitely don't follow the analysts, their questions on the cc were ridiculous. Their main motivation is keeping their firms in the running for investment banking work, that's it, could care less about the retail buyer. ARP is selling pref stock ATM and are paying a fairly good commission, who would buy with bonds at steep discount. Two things Eddie counts on, greed and laziness.
Every owner of ARP and for that matter, all MLPs need to ask themselves if they would own the co absent the distribution. I know what the answer is for me. ARP is different because of the drill partnerships, always thought it added value, but the subtraction and it's considerable is Eddie. And then look at the assets, I'd probably go with Linn for better assets and a much better CEO, management, they actually know the e and p business. But the took on too much debt and tried to do growth assets as well, but all MLPs took on too much debt. Think there are better cos than the MLPs to play a rebound in oil and gas prices. Some of the midstream cos look great for income so wouldn't do an e and p MLP for yield. Bottom line, the dist will be cut, the whole sector will probably go to zero yields. Can't see why you wouldn't merge the two, solve a bunch of problems, only one play. A GP for e and p doesn't work. Eddie seemed subdued which tells me that protecting the balance sheet is the next step. ARP survives but not a great investment for the long run if they take the right steps now.
They need to get rid of ATLS too, that would help with costs, since they are both focusing on the same play, EF. Elim the dist, merge the two cos, buy back debt.
I do expect, however, that this distribution will be adjusted to reflect the current environment, including lenders’ orientation to rewarding companies that can serve their cash flow.
From Herz, seems clear to me and connected to what the banks will do, they could cut it in half and the unit price wouldn't move much after a short term adjustment. Owning this co could try patience before prices recover.
You are right, thought it was curious that they presented no individual well data except to say something about 20% returns, other e and p s wouldn't be able to get away with that. The whole of their growth is EF drilling and interesting that they lump it in with the Rangely. Everything about their presentations always seems like it's missing something. The Marble Falls play used to get a bunch of press. Now the only play is the EF for AGP and ARP. I think with the dist cut they survive is prices come back in three years, but survival may not make a great investment, particularly if you are a yield play and aren't paying a dist.
These offset production impacts caused by frack interference is temporary and these existing wells will return to production levels at which they were producing prior to the offset completion.
Still going to be a shock when most realized what was said, the yield chasers sell out and then it recovers some. Dist continues until AGP is funded. Then it's like most of the others, a long term bet on nat gas mainly and oil to a lesser extent.
The unit price shouldn't do much except creep down some and respond to commodity prices until the "adjusted" dist is established. Would guess they don't do anything until after the first of the year, so more monthly distributions, also gets ATLS closer to raising more funds for AGP. Kind of dead money at the mercy of commodity prices. Not exactly the leaping for joy experience some were looking for.
The adjustment of the dist, the unit price is actually reacting fairly well. Either it is already discounted or owners don't know about it yet or it hasn't been communicated widely yet. The analysts on the call, who would ever follow what they project, almost as clueless as most investors. Or it's just not worth rocking the boat for a now very small cap co. My prediction, all surviving e and MLPs go to $2ish and languish there for years with no yield. ARP is not too far away except for the dist. And I'm not sure drilling EF wells is what MLP investors signed up for. I thought the strategy was to buy producing assets with shallow declines, not shale wells with 80% declines first year. Sounds like the trouble Linn got into, you can't have it both ways. But ARP needs some economic wells for the drill partnerships. Survival mode.
Cooperman understands, hasn't convince Eddie yet or that was a set up.
if you could buy back a 9 coupon at a $40, $45 price, that would be a good use of funds, better than paying that dividend the market gives you no credit for.
Reduction in base, relaxation of covenants, everyone remember those words. $700 mm, $130mm left now, could be $100mm at end of year. Not much room for multi million $ EF wells.
$180 million of total liquidity under our $750 million credit facility borrowing base, with a leverage ratio of 5.15
times. We are currently going through the fall borrowing base redetermination process with our partners in the revolving credit facility. While we expect only to have a modest reduction to our borrowing base, we are precluded from adding additional information at this time. In any event, we are comfortable with the amount of liquidity we will have going forward.
Not sure this isn't any different than what EVEP said. At least ARP's not down 30% plus. Maybe the current dist is already discounting that action, yuh think?
With respect to our current distribution, ARP’s board will consider in the near future the appropriate ongoing level. I do expect, however, that this distribution will be adjusted to reflect the current environment, including lenders’ orientation to rewarding companies that conserve their cash flow.
A lot easier to over pay for producing assets than to drill multi thousand foot lateral shale wells. Also harder than collecting fees on the drill partnerships. Still, buying back 40 cents on the dollar bonds is the easiest. Reading between the lines, that is the next move. Jury still out on drill partnerships this year, 20% return EF wells are the lure. Will see.