Not quite so brutal. Besides NRP being up 2%, ARLP and AHGP were both up 1%, RNO was up 1% and FELP was about flat for the day. SXCP, a coal-related MLP (they make coke out of met coal), was also up 1%. So at least the coal MLPs didn't do so badly. I'm ignoring OXF.
But here's an interesting item: SunCoke (the parent of SXCP) mostly operates coke making facilities, but it also operates met coal mines, producing 1.3 MM tons of met coal in 2013 at a loss, even though it got premium pricing for the coal. Most of the met coal is used by SunCoke to make coke. A while back, SunCoke said it was exploring the sale of the met coal operations. Tonight, it said it thought it could get a sale done by year-end. It will take an impairment charge of $ 103 MM for the mines on its Q2 earnings statement, and it will cost another $ 10 - $ 13 MM in expenses to complete the sale. Now the interesting part - I was curious as to who might be buying met coal mines in this market, at any price. I think SunCoke is basically giving the mines away (and it "thinks" it can get the deal done at that price!) The carrying value of SunCoke's coal reserves was $ 52 MM at December 2013, plus it had some undisclosed carrying value for the coal mining equipment. I'd guess the $ 103 impairment charge will basically write everything off to zero. SunCoke will be doing an earnings call tomorrow and I assume they will talk more about this, but for now it looks like they're trying to give the mines away.
Not a good sign for met coal unless the buyer simply shuts down the mines.
Thanks. That solved 1 of my issues. But the web site's organization is still weird.
I guess VALU's problem is that the people most likely to know of and use the service skew towards the older range of investors. And that age group isn't big on change, unless they can see an improvement. I see change, but no improvement.
They just made me another in an endless stream of offers to renew at a lower rate. I don't think so.
But thank you for the explanation.
Is BTU a good proxy for NRP? BTU's US coal ops look like almost entirely thermal, and nothing in CAPP/NAPP. We might see an indication of world-wide met coal pricing (because of BTU's Australian mines), and we may get some directional guidance as to Illinois Basin coal, but I don't know exactly how that information will translate for NRP.
Also, on Thursday Foresight disclosed a fire at its Deer Run mine (an NRP property), and today they updated the news without saying much. The fire may or may not be out yet, which I guess means the mine isn't re-opening real soon. Foresight will know more when it figures out if the fore is out, and can investigate the damage. NRP has minimum royalties, so there shouldn't be any damage to NRP's financial results, I think. But it's always better if your coal properties aren't on fire.
Thanks, I agree.
Do you know how to simply get the current issue on the new site? You know, where they list all the stocks they cover in a given industry, and then you look at each company's page? The new tutorial doesn't help, and for the past week I've been going to the local library and looking at the paper service, which is a pain.
VALU doesn't work as well as it used to, so this is probably a blessing. But it's frustrating.
Last month, Mr Cline filed SEC Form 4, reporting that he owned 32,779,281 FELP units. Tonight, oops! He files a correction, saying there was a typo mistake in the original filing. Actually, he owns 47,048,812 units. I'm not sure I see any typo in this - it's not a transposition error, obviously. And how could he or his attorney miss the 15 million units? I think there's more to this story that we will never know.
No big deal. Just like the lawsuit filed by Murray Energy against Foresight is probably no big deal (Mr Murray is no angel himself). And the fire at Hillsboro is probably no big deal. But the "no big deals" are starting to add up.
I'd love those numbers, but I think you're a quarter or 2 early. On the last call, management said that Q2 would be impacted (negatively) by a Tunnel Ridge long wall move in May and a long wall move at Mettiki in April. They also reminded everyone that the Annual Miners' Vacation is in June and July and that would affect Q2 as well. I think they were pushing their increased 2014 guidance more towards the second half of the year. Certainly there has to be some catch-up for the slow Q1, but I don't think I get to your numbers. I like them, though.
And yes, unless you believe FELP's growth prospects and its ability to sell the increased production, FELP is way overvalued compared to ARLP. I own both, but FELP isn't a long-term holding for me. FELP is trying to sell its immediate growth prospects, while ARLP's growth seems more in 2015 and 2016 when Gibson South and White Oak come into full production. The catch-up at White Oak once full production starts will be a tremendous pick-up at ARLP's level. It gets all sorts of preferred returns once production starts in full.
The thermal coal market is certainly strengthening, but imports have nothing to do with it. And the US doesn’t seem to import any coal at all from Russia.
Per the EIA, the US imported a grand total of 3,380 tons thru April of this year (latest data available), compared to 2,101 tons same period last year, for an increase of 60%. For comparison, total US production during the 4-month period was about 325,000 tons, so imports were about 1% of the total.
And almost all of our coal imports come from Colombia, Indonesia and a bit from Canada. The EIA doesn’t even show any coal imported from Russia in the past 3 years, unless Russia takes over the Ukraine, which does import a trickle of coal to the US. I can't figure out the logistics of that one.
It's not a question of clean coal; the CAPP produces the "cleanest" coal in the US and it's dying. With the widespread use of scrubbers, clean coal isn't needed - even clean coal needs to be scrubbed, and that favors the use of the cheapest coal (Illinois Basin), not the cleanest coal. Obviously, this is good for ARLP.
This AM, I saw coverage started on FELP by each of the lead underwriters except DB. Barclays is at OW and Citi is at Buy. I only saw the recommendations from those 2, not the price targets. JPM and Goldman are both at Neutral, with price targets of $ 23. (Goldman said they liked SXC better, which is strange because FELP and SXC aren't even close to being in the same business, so why bother making the comment?) Morgan is at OW, with a $ 24 price target. And Stifel, one of the non-leads, is at Buy with a $ 23 price target.
Not doing any good this AM, But better than a bunch of Sells, I guess.
KMR issues fractional shares. KMR has zero cash; it cannot pay cash in lieu.
Some brokerages have a problem with fractional shares so they sell them and credit you with the cash. But that's a brokerage decision, not KMR. I own KMR thru Schwab and Schwab has no problem with the fractions (althouigh some times, they're a few days late) but every quarter or 2, some holder complains on this board about his broker cashing them out. It's a brokerage issue.
The only good thing I saw in the release was that the slowdown in sales caused receivables to drop by $ 20 MM. Since the company has less money tied up in receivables, it was able to pay down $ 20 MM of debt. And it kind of sounds like the hoped-for recovery is being pushed back into even later in the year and into the next fiscal year.
I, on the other hand, am expecting a pretty bad Q, although I would love to be wrong.
On the last conference call, all the good things they talked about were going to happen in the second half (buying them some time). Also, in connection with the write-offs, they spoke of a continuing slow-down in several key markets. Neither comment bodes well for Q1.
And the company seems to have a problem keeping financial news confidential until it's released. We saw that in the month before the Q4 numbers were released, and I think the last 2 or 3 days' tanking is also the result of someone trading on guesses or knowledge they shouldn't have. So I'm expecting a pretty bad Q.
But VOXX's margins are low enough that any unusual item (a lawsuit won or lost, etc.) can move the quarter's bottom line. I'm saying that I think operating income will be bad. My only question is how bad?
I'm never good at counting the days. Anyway, MRD's quiet period ended today, and it looks like 7 investment firms came out with buy recommendations and the stock is up pre-market. FELP priced 3 days after MRD, so I would think its quiet period ends over the weekend.
Coal? Will any of the firms that took FELP public support it with buy recommendations? We'll see.
The 2013 earnings were about 70% due to the reversal of the company's deferred tax liability, when it converted from a taxable corporation to a non-taxable partnership. That caused ENBL to reverse a $ 1.2 billiob deferred tax liability. The company's operating income in 2013 was up about 10% from 2012.
Actually, the modest proposal was meant as satire. Jonathan's Swift's original modest proposal, written during a time of hunger and poverty in Ireland, was to suggest that poor people should sell their children as food for rich people. His idea was to shame the wealthier people into doing something about poverty. It didn't work, by the way. Swift got famous, but the poor people didn't get anything. So I wasn't really serious.
But the more I think of it, I think maximizing the distribution would benefit ARLP as well. All investors care about these days is yield, and to a lesser extent, growth in that yield. So if ARLP were to maximize the yield, even at the cost of hurting/destroying the balance sheet, I think the higher distribution would result in a higher price. Take a look at FELP, which went public a few weeks ago with $ 1.4 billion in debt and zero capital, post the IPO. It's also in coal, and people ignore the ugly balance sheet and just focus on the DCF and promised distribution growth.
And I think ARLP (and FELP, for that matter) will be fine for the next few years with the focus on Illinois Basin thermal coal. NRP had 2 problems, 1 of which will eventually solve itself. First, it spent a lot of money, probably over $ 1 billion at this point, on coal reserves in Central App, which is not the place to be for thermal coal. That problem can't be fixed. CAPP thermal coal will essentially be gone within 5 years. And NRP made a big bet on met coal reserves (partly overlaps with the CAPP issue), which should eventually work out, but right now is in the tank. So, because its basic business had these problems, it had to diversify, but it waited way too long. ARLP doesn't have the same urgency, so I'd rather get a higher distribution and use the money to buy oil & gas MLPs on my own.
My calculations of AHGP’s IDRs show that AHGP should be able to grow its distribution almost exactly 26% faster than ARLP for the next year or 2. So if ARLP raises its distribution by 10%, AHGP’s distribution should grow by 12.6%; if ARLP raises its distribution by 50%, AHGP’s distribution increases 63%, and so forth. While this sounds good for an investor in AHGP, it’s actually much slower growth than most other GP’s that are in the 50/50 splits. Unless ARLP issues more units (which is extremely unlikely), the 26% distribution outperformance is it for the near future. Eventually, as the distribution grows, the relative outperformance by AHGP will shrink.
The reason for the slowing growth at AHGP is that it actually runs ARLP to the benefit of ARLP, not simply for its own benefit. Most GPs follow the KMI/KMP model – maximize current distributions (with the GP getting 50% IDRs), which forces the MLP to regularly issue new units to finance growth. These new units already carry 50% IDRs, so the GPs benefit both from the growth in the business and the growth in common units outstanding.
AHGP/ARLP has done the opposite. It is the only MLP I know of that regularly distributes less than earnings, DCF or EBITDA or whatever measure of profitability you might choose. So AHGP is not benefitting from the IDR payments it could receive if it forced ARLP to distribute a higher portion of DCF/EBITDA/whatever. Because this accumulation of income at ARLP helps it to finance growth internally, there is less need to issue new units. In fact, ARLP has not issued any significant amount of new units in years (maybe never), so there is no growth in the IDRs on that score. From 2007 until currently, ARLP has increased common units outstanding by only 1%.
So here’s my modest proposal, with apologies to Jonathan Swift: as the GP, AHGP should force ARLP to start distributing 100% of its DCF. In fact, maybe ARLP should make a 1-time current distribution of all the accumulated earnings it has invested in the business over the past few years. Then ARLP should follow that with an equity raise to replenish capital. And finally, ARLP should start buying/building new mines (in the Illinois Basin, of course) and finance that growth 50-50 debt and equity, but especially equity. Then, having established a good track record of maximizing the IDRs, AHGP should sell itself to ETE, WMB or maybe KMI.
FELP has been trying to go public for more than 2 years. Its original S-1 was filed with the SEC is early 2012, but the attempted IPO was abandoned because of market conditions - that is, everyone hated coal. Things may look bad right now, but the sentiment has shifted in a pretty big way. ARLP/AHGP have been doing fine, RNO is up nicely recently on news of its new Illinois Basin mine starting operations, and NRP has done pretty well also, largely on the heels of FELP's success. (FELP is NRP's biggest lessee.)
And FELP was able to go public while leaving almost zero capital in the partnership post-IPO. Something like $ 1.4 billion of debt and close to zero equity and the IPO was fully subscribed.
I don't see that. Both IEP and CVI show IEP's ownership at 82% at 3/31/14, same as at 12/31/13. Where do you see the 3% increase?
Feel free not to be annoyed by the following comments. I was annoyed.
Keep in mind that this presentation was a sales pitch, so I shouldn't be surprised when Mr. Hogan stresses the positives, even if they are pretty weak. But he talked 2 times and had 2 slides showing that NRP's EBITDA margins were 89% (that's EBITDA divided by revenues). My comment - the only reason the margins are that high is because GAAP accounting doesn't let NRP book its share of OCI Wyoming's revenues. So NRP simply books its share of OCI Wyoming's net profit and EBITDA in revenue and EBITDA. That may sound confusing, but what ti means is that NRP shows a 100% EBITDA margin on its share of OCI Wyoming's operations. If NRP were to adjust its revenues to reflect its share of OCI Wyoming's revenue, the EBITDA margin would by a little below 60%. Which is still great, which is why I get annoyed when they report the 89% and don't mention how it got that high.
And lastly, he made a big point about APP steam coal constituting 54% of NRP's revenues in 2005 versus 16% today. He said the reduction was the result of NRP's diversification strategy. And that's true. But the slide also showed that the APP steam coal revenues in 2005 were $ 86 MM, compared to $ 51 MM today. So the drop in % of revenue from APP steam coal was the result of 2 factors, and he chose to mention only 1.
But it's a sales presentation, so these are really small nits. The bigger point is that NRP isn't going under any time soon; it will be around long enough for the next recovery in met coal, whenever that happens.