And there are a lot of people that buy based on the distribution alone. If commodity prices don't rise materially, mainly nat gas for ARP, then this company is history. They have no cash for reinvestment, volumes will fall, the dist is a bad decision, no acquisitions which is the reason for an MLP. Enjoy the dime a month until it ends. If they were doing the right thing for investors, they would have eliminated the dist.
And you aren't speculating that commodity prices will be higher than the markets are forecasting. I sold ARP at $10 and ATLS at $32 which I bought in the low single digits, despite Eddie's bumblings. Good luck, you are going to need it with Eddie, you'll find out in time. Nat gas is $2.50 today. And oil in the high $40s. Those are facts, what it will be in a few years is a guess. And the downside if you guess wrong, at least you get your investment back if they continue the dist and you're left with a 50 cent unit value at best. Calculate what the company is worth without the distribution. The hedges are the only value and the assets are third rate. $1 price next year.
The avg yield for the small cap MLP group is a 10% and for the general partner embedded MLPs is 6%. And CEQP is 20%. At those yields, unit value should be $5.5 to $9. Can't really find a comp above 10%, just assume a 12% yield minimum, unit price should be $4.50, 60% above the current price. This is a lousy short candidate. I guess you have a $5 price by the end of January. Tax loss selling will probably continue for a while.
The futures show oil at $57 in 19 and gas at around $3.10, hedging at those prices doesn't cut it. The dist costs $1.20 per mcf and volumes will continue to fall. The only value in this company is the hedge value. Take that away and the reserves value doesn't cover the debt. Blinded by the "yield", the prudent thing to do would be elim the dist and hunker down but Eddie needs the cash to the detriment of ARP owners. ARP will never buy anything else, they can't afford it. No equity currency and $1.5 billion in debt.
The deal is 1.8716 shares of ETC, which should track ETE value, for each share of WMB. It's not $64 or $43.50 or anything else. If ETE is $30 when the deal closes, it will be a value of $56 per share of WMB. If you can't figure this out, you shouldn't be investing or speculating or whatever you call it. The currency is not dollars, it's shares of ETC.
The savvy investors in this stock are amazing. They want to correlate ARP with $100 oil but don't even consider $20 oil. Don't confuse me with facts. Eddie will take care of you. Tudor Pickering just lowered 16 nat gas to $3 and $3.50 for next few years. Not going to cut it. $60 oil for next several years and gas in the $3s. It's not that hard to figure out. Eddie will pay out the hedges to ATLS and ARP will be left with zilch. What a guy.
So where do you think Eddie's co will trade if oil retraces to new lows. $3+ price will look great. This is a gas co but it will correlate with oil in the short run as so many have suggested, not rational but so it is. My guess is $1s unit price. But great investment, 100% yield. Just a matter of time before the dist vanishes.
Tick tock. Dist coming and $1.5 billion revolver, doesn't sound like a #$%$ the verge of bankruptcy!!!!!!!!!!
Beginning in the third quarter of 2015, Crestwood Midstream unitholders will begin receiving quarterly distribu
tions for all Crestwood Equity units received through the merger transaction. Crestwood Equity?s annual distribution is currently $0.55 per common unit and is paid in accordance with Crestwood Equity?s partnership agreement. Crestwood Midstream?s incentive distribution rights were cancelled upon completion of the merger, and Crestwood Midstream now operates as a wholly-owned subsidiary of Crestwood Equity. In conjunction with the merger, Crestwood Midstream today entered into an amended and restated credit agreement establishing a $1.5 billion revolving credit facility.
Doubled down at $2.30. Going to do it again at $2.70. After the next dist announcement, you will be gone. You don't have a clue what you are investing in, you never did mention what First Reserve group you were referring to. $575mm of ebtida can easily take care of $3 billion in debt, when 90% is fixed. Your bk coment is ignorant. Try some more of those exclamation points, they always seem to correlate with someone who doesn't know what they are talking about. Get ready to pay the dist in a few weeks.
The ebitda should be $575 million this year, enterprise value/ebitda is 9x, should be 12x for average MLP with IDRs embedded, $5 to $6 minimum unit value. Quarterly dis will be announced in couple of weeks, the $2 will be history. Goldman is trying to talk oil down but not sure they will be successful. A bad short target and time will prove that. May double up again today. Yield at least 12% gets you a $4.50 unit price. And wouldn't be surprised if an e and p that wants to shed midstream assets wouldn't snap up CEQP and drop down more assets to it. The positives far outweigh the negatives. 90% of ebtida is take or pay or fixed fee. More than 50% of ebitda is take or pay, it's guaranteed revenue. Even if they eliminated the distribution, the unit price would probably go up. Only downside probably now is a revisit of low oil prices but everyone expects it. This is a good bet.
And the price of oil on the futures strip five years out is $59. You had better have figured out the equilibrium price of gas and oil if you are going to win in this bet. $60 oil and $3 gas for the next several years won't cut it. Those prices could be with us for a while. These aren't my projections, this is what the futures market is telling you. Good luck.
Don't confuse a sector move with something relevant for the company, nat gas is $2.48 today and $3.28 five years out from today. That won't cut it. If you don't see much higher gas prices, this is terrible bet, but you do have Eddie, he's going hedge more for you. The reserves with that futures strip are worth zip.
This is a losing short position, I don't short, but choosing one that pays a 20% dist doesn't make sense. Would expect a bump when the dist is announced in a couple of weeks. Although eliminating the dist and buying back shares would probably be the more effective use of cash. Projecting out 3 to 5 years, this should be $15 to $20 if the macro holds up. That's a five times current price. Most won't have the patience. The unit price doesn't correlate with the co asset value.
What's the old saw, "don't confuse me with facts". Most "investors" focus on the stock price and know little about the underlying fundamentals. It's going to be hard enough calling a recovery in oil which is much less a factor than nat gas and we could be over run with gas still as oil recovers. You get a $75 oil price and gas stays in the $3 range for several years. If you think you have the macro figured out, ARP would be the last place I'd want to bet on. The only value now in the company is the hedges and the reserves value wouldn't cover the debt. The reserves are third tier.