Bn, I looked at it briefly, not well done, includes a couple of e and p MLPs, Linn and Legacy. Capex mentioned includes growth. CS said distributions will be up 7,8%. Most of the projects they are doing now are commodity insensitive, fee based. There is the issue of whether the e and p s will try to renegotiate fixed fees. We will get to over built, ETE Warren says it's the way cos operate, same for e and ps. I think we are in later innings but still have a few more years. Exports of oil and nat gas will help. I think this dip in oil could motivate govt to allow oil exports.
The value is based on the stock price of ETE which at $28.50 makes the offer around $53 for Williams. Warren doesn't have to do anything, someone like PSX could make a higher offer, say $60 because their stock price has held up better than ETE's. Not sure the synergies would be as good as ETEs but who knows.
Sankey comments that oil is going down in next couple of months with refinery demand declines, his pick EOG, stay with quality, low debt. But asked about the highly leveraged cos, his view is that the equity values are zero and the play is in the debt. Not a good scenario for ARP, all of the MLPs and many e and p c corps. The rest of the year could be bloody. Forget the dist and focus on whether they can survive next few years. Gas is probably key but investors seem to focus on correlating everything with oil. So the gas concentration won't matter. Eddie wants to buy the debt, seems that should be investors first priority.
That is more pertinent, gas is $2.80 today and $3.20 three years from now on the strip. Oil is still in the high $50s three years out. Save the $300 million in hedge value and cut the distribution. Mary's projection of $75 oil and $3 gas is realistic, if not bullish for oil based on the strip, and the strip should have been believed before the oil collapse. Not going broke faster than anyone else doesn't sound like a compelling investment opportunity. Again, the distribution is blinding management, ATLS needs the cash, and investors.
Birdog, Credit Suisse out today with bullish call on MLPs, 40% potential return next 12 mos. They think growth of 7-8% vs 5-6% last year. Growth is expanding. Sector yield is 7.2%. In past when yield spread was 500bpts, return was positive 100% of time. Consolidation in sector gives more support to values. Think your Alerian 2x could be a great bet. For some reason, I think we could retest lows but the bottom is in for e and ps and midstream. 10 yr T note 2.12%. Seems like inflation with what China just did is not a risk in the near term. Not sure what the Fed would point to with a rate rise. If I had money would be buying for today for the next three years, would still stick with the midstreams, but that's just my bias.
Yuan depreciation won't help oil prices today. Couple the global issues with over supply this fall, we could retest the lows, an issue for every e and p, but the high debt, high cost MLP, all of them, won't fare well. Yesterday may have been a gift.
There is a possibility that there is a collapse this fall but agree that $60s next year seems reasonable, still think $75 by end of 16. China depreciating yuan it seems won't help oil price. Deflation in the US probably now an issue, Fed no pressure to move.
The strip shows $59 in three years, that's probably more pertinent. And gas is in the low $3s. Both numbers aren't large enough to generate enough cash, volumes will continue to shrink.
Any fundamental investor who has been involved for a few years, knows Cohen and they are gone. Should say knowledgeable fundamental investor, I think Cooperman's ego is keeping him hanging on, but would bet that is changing now. Fundamental investors wouldn't touch this co now. Crummy assets and massive debt, might buy them for pennies on the dollar in a couple of years. There are no fundamentals except the hedges get you a couple of years and if they pay the dist out of the hedge value, what's left is worthless in terms of equity. That seems a massively risky bet unless you believe gas is destined for strength. And Cohen is an additional liability imo. $2 again unless lightning strikes Eddie again.
Seems all of the infra cos will start focusing on exports. Always difficult but think if we do sink to new lows, $30s, the stocks might retest previous lows but don't see how they do any worse, except for those on verge of bk. I just want the Williams deal to get finalized, I need to diversify some but may be hard to if the new ETE is growing distributions 20% per year for the next few years. Warren has put together a great group of assets and as he said, they aren't finished yet. They have a relatively strong currency. for $30 billion he could buy OKE, TRGP and PAGP and control another $40 billion of assets in the LPs, OKS, NGLS and PAA. Not sure he could get away with it but I'd bet he makes another offer, best fit? He already wanted TRGP, OKE would works too. PAA would be the most valuable but is controlled by several big holders, not going to get it on the cheap. Would bet KMI would like most assets. EPD seems to be content with bolt on assets and organic. Next three years could be interesting.
Credit Suisse mentioned ETE family of MLPs, Sunoco, ETP. Magellan and OKS. Said all three have good prospects. WMB needs to finalize the deal with ETE and get on with it. Could be a great co for the next few years. ETE could also end up with OKE or PAGP or TRGP. They seem to be the best targets. The CS mention is in a Wall St Transcript article.
Amazing turnaround for e and p s, may not last if we see $30s oil, but couple have said the equities bottom before the commodity does. Anyway, nice to see some green.
The Linn CEO made $2.5 million and it produces 1.2 bcf per day vs 270 million cf/d. Five times larger and 13% of Atlas pay. The dist is blinding but not for much longer.
The Cohens pulled $20 million last year out of ATLS/ARP in comp and the market cap is $400 million, 5% of market cap. The CEO of Exxon made $7 million, 5% of market cap would have been $16 BILLION. Wonder if they have change of control payments when they merge ARP with ATLS, probably.
Would bet that Lee is bailing, don't see how he sticks with it after his exchange with Eddie. If he does, they deserve each other, he drank the koolaid. We get $30 oil and nothing survives a retest, even if you distribution is 40% or whatever. The fact that it is that high, the market is telling you it is history. Eddie has been optimistic and pronouncing whatever was needed at the time, and the track record is consistent. Not cutting the distribution is a travesty, should have been done already. Might even bump up a few pennies when it happens.
Think about that incentive, they will gut ARP, cut them loose. So you do have the advantage of the dist continuing for a while, but nothing left after the hedges are gone. If they were doing the right thing for ARP, they would cut the dist now and try to survive. But they won't. ATLS probably won't either but not much comfort for ARP. A GP for an e and p MLP is flawed, Eddie never figured that out. Still think they will try to merge and eliminate the dist, they might survive, with no dist and a low single digit price for years.
Every thing he said is fact, go back and check the history. They have done a lousy job as an MLP, buy high, sell low, I got confused. Part of what you say is true, the MLP form is probably history, it will die a slow death and it won't be fun for investors in the process. MLPs only worked with rising commodity prices and the expectation that they would stay high. My guess, gas stays about where it is for several years and oil moves up to $70s. Not a good scenario for ARP. At least you will get you 11 cents a month for a few more months. And then the assets will be valued like any other e and p co, and they have third tier assets at best. Try to sell some coal bed methane reserves in the west.
Kilduff still sees $30s before a tunraround, vols stay up longer than I expected. Knighthead distressed debt investor says the market is still valuing equities at $3.50 to $4 gas and $60 to $70 oil, those numbers don't seem a bargain today. Curious that I paid $4 per gal for gasoline yesterday, gasoline seems way too high. Not sure we have much clarity until next year, but that seems to be wisdom so setting up for an upside surprise. At least cos are still cutting capex plans for h2.