Always kind of interesting that if you are critical, you are a slimy short, vs a slimy long, I guess. Not sure I would use that label for Cohen, more like clueless, and the market keeps giving him another chance to screw it up. A call, this co never sees $5 again in it's existence. Most MLPs will go the way of the royalty trusts, a flawed form. The positive is the world can't survive on $50 oil but even if it recovers sooner than later, gas is probably mired at $3 for several years, the irony is that a oil price recovery will produce more associated gas and keep the price down. The best move is to eliminate the dist now and hunker down for survival. A 30% yield tells you that the market is expecting it.
Jr, I don't have an answer. I would guess that verticals in the Permian is the answer, holding leases by smaller operators. Will see if I can find anything.
Meanwhile, ARP probably slips to $3s. There are better speculations, LINE at least has a competent CEO.
Never shorted a share of anything, sold ATLS/ARP after the Targa deal, $32 ATLS value. What would you pay for ARP without the hedges, $2 maybe and the hedges are maybe worth $2. Oil could snap back to $70s next year and gas still mired in $3 range. And worse than the fundamentals, is you have the Cohens to deal with. There should be a discount for that factor. Saw
PVA comp for E TX asset sale, flowing barrels, ARP should have a $3 per share value. Based on reserves, value doesn't cover debt. Barring a quick recovery of oil AND gas prices, dist cut will happen and would guess it goes to $2. If you are betting on a recovery of commodity prices, there are better bets. Best move would be to cut dist now and wait it out. Unit price goes to $2 and value is $4+. ARP is a gas company and that price, who knows when it recovers, look at the coal cos going bankrupt almost daily. Wait for dist elimination and speculate on recovery, probably a decent speculation at $2.
Book value is irrelevant for most cos and completely for e and p cos. Put the expected price deck to reserves and that is the value. $90 oil, $4 gas gets you a different value vs $60/$3 prices. The latter price deck imo gets you a lower value than the debt. No equity value.
At $60 oil and $3 gas, the equity value is zero, forget about the distribution and hedges. You have to have a bullish outlook for prices to buy it now. Still think it has a chance to go lower. They may rationalize that the dist could be cut to zip and the unit value might move down a $2-$3 but at least it would survive. Would be the cut is just a matter of time.
WMB is my largest holding and I will be very displeased if they let the ETE deal get away, even it isn't bumped some. As for MWE, I like the combination with Marathon but don't think the price was high enough, would probably vote no on the merger. CS has a $81 target on MWE stand alone.
Right as someone said the whole e and p sector is collapsing again, and the MLPs are at the bottom of the food chain. The coal cos are starting to go bankrupt, noticed Walter announced, ANR will also. BTU is at a $1+. The MLPs can probably forestall bk but they need to cut the dist's to zip. Would you want to own ARP with no distribution. Only thing that could save most is a rapid snapback in ng and oil price. I think it has to be a lot higher in a couple of years, but that may be too late for most of the cos. And growing the dist won't happen, imo. And this is absolutely the worst management in the whole energy sector. And Cooperman is throwing good money after bad, thinking he will be right, ain't going to happen. There are cos to be bought today in e and p but they should have top tier assets, low debt and great management, none of which applies to ARP. ATLS is worse, except they might figure out a way to screw ARP to save ATLS.
More I think about this, seems execs took care of themselves at the expense of unit holders. Sold at a discount to keep their jobs, and as someone said, now at the mercy of the GP, and as we have seen, bad things usually happen longer term. An EPD combination would preserve the GP. Seems they could get around the concentration issue.
Interesting that MWE is trading above the deal value. Indication of expectations for higher offer?
I think this is a good deal longer term, increases the growth rate, gives the combined entity drop down opps plus organic growth, best of both, but the price should be $10 more. At this price, someone else could step in. Not sure I would vote for a high $60s buyout number. Should be $80 plus at least.
$68 is too cheap for the MWE franchise. Credit Suisse had a $80 plus target on the units. MWE execs are keeping their jobs, and my impression now is that the unit owners are paying for price for that. A possibility that another bid might emerge. It is a good combination but not enough consideration.
Agree that the decline has started but it won't help nat gas much and it will take time for oil to recover. Still think ARP may not survive, could with elimination of the dist but then you have a $2 value.
You can't go from 1600 rigs to 600 without a response, even with efficiencies. Again, the shales are producing 5mmb/d and the global demand will be 94 mmb/d next year, and natural decline is 5mmb/d worldwide. The conclusion that the shales will supply the world is patently flawed. Seems most don't go beyond the headlines.
Next month, shale oil production in the US is forecast to decline 91,000 barrels per day (b/d) to 5.36 million
b/d, according to the US Energy Information Administration’s (EIA’s) latest Drilling Productivity Report. In June, the EIA projected a 91,000-b/d decline for July. The EIA forecast in April that shale production in the US would decline in May, marking the first such declines in more than four years. The report focuses on the major shale plays in the US, including the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian, and Utica shale plays. Oil production from these largest US shale plays will plunge in August for a fourth consecutive month.
cbd, seems to me that the rollover in vols from less rigs has started. At $50, cos won't add rigs. Just as we bottomed at 620 rigs, will be interesting to see where the production hits bottom. I own some MWE, being acquired by Marathon and their forecast was that NA would be producing around 15 mmb/d in 2030, 4mm more than now. And the globe demand will increase 1.5mm per year, that's 20mmb/d of add'l demand. The US e and p s will do well but they can't supply the world. $60 oil won't cut it, imo. Just a matter of time. The only way it works is for finding costs to come down significantly and then the e and p cos will maintain their margins, so either scenario works. Still guessing we get back to $90 oil within a couple of years. Time will tell.
cbd, lower 48 prod went from 9170k/d to 9104k/d, -66kb/d. Seems the decline should start to kick in. Inventories down 4mm+, don't know what the est was. Seems this is going to take time. Iran will be next year. Seems the rebound will take a while, but it could surprise with demand, someone rings the bell, and we avoid Goldman's quarterly call. I am almost always an optimist, my bias.
I doubt it but maybe someone like EPD would make an offer. As someone said there is substantial breakup fee. Not an arb but there should be a couple of dollars difference. If MWE trades above the offer value, then something is probably up. MWE is a great franchise, but at what price. The Marathon combo looks like a good one for both cos.