Not yet. I almost pulled the trigger a week or 2 ago, but ARLP/AHGP tanked so I bought them instead. Another coal MLP, but this one extremely profitable with a great coverage ratio. If coal weren't so ugly, I'd buy a whole lot more of it; they have 2 mines coming on stream in the next year and a half, 1 of which is pretty much guaranteed to produce great cash flow. But they don't say much about their contract positions so I can't go crazy over them.
And I have way too much invested right now in all sorts of MLPs. I'm way over my target allocation to MLPs. So I need to sell something before I can let myself buy another MLP, including NRP.
But thanks for asking.
Yes, OCIP is an MLP. The IRA tax issue is complicated by the fact that the IRS has never ruled on certain important issues related to sales of interests in MLPs. But there is always a risk that an IRA might be subject to Federal income tax (called the unrelated business income tax) on income or gains resulting from an investment in OCIP. It depends, in part, on how many units the IRA owns, as well as how much taxable income it generates. In all likelihood, there would be no tax exposure for the first few years that an IRA owned OCIP - the company estimates that taxable income thru 2016 will equal less than 30% of the cash distributions. But when you sell, the tax deferrals may well come back to haunt the IRA as UBTI. So I tend not to invest in MLPs in my IRA or Keogh accounts.
How many KMR shares do you own? KMR only pays dividends in shares, including fractions. So you should have received the dividended shares, including fractions.
I own KMR thru Schwab, and it picks up all shares, including fractions. I don't know how Fidelity handles fractions; maybe it sells them and credits you with the cash?
You would need at least 60 to 70 KMR shares to receive a whole share as a dividend, depending on the quarter. So my first question is whether you own at least this number of shares? If you own fewer shares, check your cash balance. I suspect you're getting factions and Fidelity is selling them. If you own more than 60 - 70 shares, you should see at least 1 additional share each Q. Ask Fidelity what's happening to them.
And sales of the fractions are capital gains - you allocate a portion of your original cost to the dividended shares, and compare that to the sales proceeds. The holding period goes back to your original purchase date.
There's no assurance that TROX will be entitled to the deductions because of its bankruptcy restructuring. In its SEC filings, the best TROX could say was "However, pursuant to the terms of the litigation trust, Tronox Incorporated could continue to be treated as the owner of the Anadarko Claim solely for purposes of federal and state income taxes. Depending on the outcome of the Anadarko Claim, it is possible that Tronox Incorporated will receive the benefit of certain tax deductions that would result if the Anadarko Claim is resolved successfully and the proceeds of such Claim are used as contemplated under the terms of the litigation trust." I haven't kept current with any subsequent disclosures (the doc I quoted from was filed in April 2012) so maybe TROX has gotten more comfortable with its position, but absent that, there's a lot of "ifs" in its tax position, even aside from its ownership change history. And of course, its need to make enough money to use up any substantial part of the deductions.
Like production MLPs? Not a whole lot just now. But OCIP is not much different from PDH, which I wouldn't touch just now. And if you think about it, it's similar in nature to the refinery and nitrogen fertilizer MLPs, some of which I do own. My problem with OCIP is that I have no way of knowing how the market for methanol is doing. I own a little OCIP buit won't buy more until it has a few qaurters as a public company under its belt.
It's probably a lot less than that. In TROX's bankruptcy restructuring a few years back, it reported a tax deduction of $ 1.13 billion for the value of what was given to the creditors. The company has not even started to use up that deduction yet, and has set up a full valuation allowance against the deduction. So TROX needs to use up its current loss carryovers (no guarantee) before getting any benefit for the Anadarko payments, whatever they are. So I think you need to push your years back a bit.
Also, TROX has said in the tax footnote that it thinks the bankruptcy did not result in a change of ownership of the company. No guarantee of that, looking from the outside. If a change occurred, a whole other set of rules applies.
And I'm not sure where the Anadarko deductions will show up, assuming TROX gets them. To the extent that the claim related to US properties, which I assume is most of the claim, the deduction is a US deduction. But to the extent the claims related to non-US environmental problems, I think the deduction would be limited to whatever jurisdiction the claim relates to.
It's all conjecture right now, as you said. First, there's the appeal. Then, TROX, which presumably has all the necessary info, will have to sort things out and tell us what benefit it might get. So for now, it's fun to guess, but I can't see it being worth much to TROX today. Other than getting this done.
Thanks for reminding me. I had forgotten it was being released today. The report tracks actual US energy production and usage, and projects both usage and prices for quite a long time. I only follow the near future projections - over the next few years. Even that is a gamble, but it's better than anything else I've seen. Also, I fgure investors in general are using the same projections, either directly or through analysts.
Not surprisingly, the report raises its projected natural gas prices over the next few years, by 10% to 20% above last year's projections. Should be good for coal, and it is. Just not in CAPP, which is where most of NRP's reserves are.
The trend is complicated, but in general, the EIA thinks thermal coal production will remain stable over the next 5 years. But how it gets there is interesting. It is projecting a huge drop in CAPP production, from 133 million tons in 2013 down to 94 million tons in 2016. That is a drop of 40% from last year's projection of CAPP's 2016 production, which is incredible to me. At the same time, Illinois Basin production is expected to increase from 2013's 134 million tons to 166 million tons in 2016, which is why the total remains stable.
The EIA report did not project prices by CAPP. Instead, it grouped CAPP and NAPP together, and projected a 10% price decline per ton over the next few years. They had some positive projections about NAPP production over this time frame, so I suspect CAPP prices are expected to drop more than 10% per ton.
So lower production and lower prices for CAPP. NRP had better hope that Foresight, its major IB lessee, gets its production up big time. Or that its non-coal investments pay off.
I was surprised about the favorable projections for IB coal. Maybe I shouldn't be. ARLP has 2 new IB mines coming on line in the next year or so, and Foresight predicted significant increases in IB production in its S-1 (later abandoned) last year. More later.
Part 2 - With all the new production coming on line in IB, I'd have expected pricing problems, but the EIA doesn't see that coming.
The projected prices may include met coal; I can't tell from the tables. That would explain why APP coal still costs more than IB coal by a wide margin. So take the projected prices with a grain of salt. In fact, take all the projections with a grain of salt. But they illustrate that coal people think IB is the place to be.
ARLP lists the South Gibson mine as Illinois Basin - page 42 of the last 10-K. I'm not much on geography, so it might be close to Northern App, but I went with the company's description. I'm not sure it matters much; NAPP coal is almost as good as IB and much better than CAPP.
The 10-K also shows South Gibson as being higher sulfur than the existing North Gibson mine, but it certainly lower sulfur than all the other ARLP mines in IB and NAPP, except for 1 very small in West Va.
I don't know where the EIA gets the information for its reports. I assume at some point in the process, they rely on information from the miners about their plans. That is why the expected drop in CAPP production is so concerning for NRP. Production at NRP-owned reserves accounts for about 15% of all CAPP production. If the miners are indicating a 40% drop in production over the next 3 years, that's got to be a major issue for NRP. NRP's management aren't dummies; they have been buying reserves in the IB that are mined by a related company, but production isn't growing anywhere near as fast as I thought it would. So the first thing I would like to know is what kind of production NRP expects from these newer mines over the next few years. They have really good pricing on these reserves, and increased production could go a long way toward offsetting CAPP problems.
I don't think OCIW will help much. This year, NRP had a preferred rate of return from OCIW, which increased NRP's DCF a lot. They gave up that preferred return in the restructuring, so they are left with normal operations which are good but not great. That leaves either the BRP joint venture, or some new acquisition that we don't know about. So I'm on the sidelines, still, until they announce Q4 results and give preliminary guidance for 2014. Their guidance is generally spot on.
CS reduces its rating on both SXC and SXCP to Neutral from Outperform. SXC is trading above CS 12-month target price of $ 19, and SXCP is trading right around CS 12-month target price. They like both companies, it's just that they have reached or exceeded the target prices.
Interesting comments about SXC's breakup agreement with Sunoco, which expires on January 18, 2014. That agreement prevented SXC from taking several steps, such as selling its coal mining operation or buying back any stock. They are looking forward to company guidance on what they may do next.
The maximum settlement to TROX is zero. In the bankruptcy proceeding, TROX assigned 100% of its claims against APC to a trust for the benefit of various government agencies and private plaintiffs. TROX gets no cash from APC whatsoever, as it has disclosed in its SEC filings. It may be entitled to tax deductions for APC's payments, or at least a portion of those payments, but there's no guarantee that TROX will get to use those deductions in the reasonable future, because it has to use up its own loss carryovers first.
Hope this helps.
You don't know that it's an MLP, and you don't know its distribution policy, but you have a strong sell anyway?
It's an MLP and its distributions vary based on quarterly results. Same with the other nitrogen fertilizer MLPs, TNH and RNF. Fertilizer prices have been dropping all year. Plus, every couple of years, the plant is shut down for a while for repairs and turnaround, which tends to kill 1 quarter's distribution - that's what happened to the first distribution paid in 2013.
Distributions vary for refinery/fertilizer/plastics MLPs. The only 1 that I know of that has tried to maintain a set distribution in 1 of these industries is CLMT, a refiner. But even they had to cut the distribution significant a few years back, and they aren't earning the distribution now.
I don't think you can get any accurate reading of propylene prices. At best, you can see some spot sales, with very low volumes, at CME, or maybe in reading trade publications. Further, because PDH works off contract pricing and not the spot market, finding relevant numbers is even harder.
Each Q, PDH announces market prices, but its own sales always seem to be 4 or 5 cents less per pound (just by dividing sales by tons sold). So I suspect that the trade-off for the security of contracts is that the customer gets a 4 or 5 cent discount.
On the last call, PDH announced that propylene market prices averaged 67.5 cents in October, and were expected to fall for the balance of 2013. I think that information, coupled with the rise in propane prices, is scaring people.
Also, each Q PDH announces the spread between propylene and propane prices, but I think that is based on the "market" pricing, not PDH's contracts. So last Q, the announced spread was 39 cents, but my calculation of PDH's spread was 34.7 cents (PDH tells you how to compute the spread). That was based on $ 1.03 average propane price and 64.1 cents actual propylene prices received.
If I input $ 1.20 for propane prices and somewhere between 60 and 63 cents for actual propylene pricing, I get a spread of 26 - 29 cents, which is ugly. Even if the 73 cents you mention is accurate, the average price for the Q would be lower due to October pricing. So I think the Q will be ugly.
But to be fair, the company way outperformed my expectations in Q3. So my calculations are really just stabs in the dark.
Per Yahoo (always a risky source), NRP closed at $ 18.54 on Dec 31 2012. So YTD it's up 7.5%. And at that price, the yield this year has been almost 12%. Not that bad. And for coal, really good. Makes you wonder if it has bottomed out after pretty bad 2011 and 2012.
One coal MLP that has done better is ARLP, up almost 31% this year plus distributions. And its GP, AHGP, up 20% plus distributions. I don't follow the C Corp coal companies, so I don't know how this compares to their performance. But I suspect that these 3 coal MLPs have outperformed all the other coal corporations.
The original poster was talking about the settlement itself, not the tax deductions.
Keep in mind several things - TROX currently has an NOL carryover in excess of $ 1 billion, so it has to use that up before it gets any cash benefit from any deductions arising from the Anadarko litigation. With the state of the TiO2 market, I'm not sure how long this will take.
Next, the timing of the deductions depends on the structure of the settlement - that is, the deductions may only arise as remediation takes place, which could take years.
Next, 88% of the settlement goes to federal & state governments and the Navajo nation. (It looks like its all domestic US, which surprises me, but that's how it looks.) To the extent that any of the payments are characterized as penalties, the deductions may not be allowable.
Finally, assuming the deductions are allowable. it may mean that Tronox cannot be an acquisition target because of the NOL change in ownership rules.
So I don't think the market will put much value on the tax losses until (1) Tronox says what the amount and timing is, and (2) Tronox explains how long it will likely take to utilize the losses.
I own TROX and would love to see the company get a nice benefit. And if the stock goes to the low $ 30s, I'd love that even more. It's just too early, I think.
I forgot what is likely to be the most important issue. Assuming Tronox is entitled to the deductions, they all seem to be in the US operations. More than half of Tronox's sales are outside the US, particularly Australia and South Africa. The NOLs would generally not be available to offset those foreign taxes.
Further, the parent company moved its legal residence to Australia in 2012, which has tax consequences. Even if US taxes are reduced, Tronox would need to dividend the US profits to the Australian parent company somehow. I have no idea what the Australian taxes on such dividends might be.
Like I said, this gets complicated. We need to wait for Tronox management to tell us what's going on with the tax deductions. They may not want to venture an opinion until the case is finally settled, so it may take a while.
In the meanwhile, everyone have a good Christmas.
I'm tempted to buy some NRP for a short-term trade. I still may, but I can't own it long-term until the company gives some 2014 guidance.
Just a comment - in 2012, Foresight Energy, which is part of NRP's largest single lessee filed for an IPO which never took place. They lease 3 Illinois Basin mines from NRP, 2 of which are in production, with no great prospects for growth. But Foresight said that the third NRP mine, Hillsboro, would eventually have annual production capacity of 27 million tons using 3 long wall mining systems, which is huge. The first system went into production in Q3 of 2012, and NRP disclosed that 2012 annual production went to 1.8 million tons. So I figured 2013 production would be at least 5 million tons, with an 8% royalty rate (with a fixed minimum per ton), or about $ 20 million in added royalties. And I figured the production would ramp up over the next 3 - 5 years, to somewhere near 20 million tons. I wasn't sure exactly who Foresight would sell all this coal to, but I was pretty optimistic about the IB prospects. I figured it would largely offset CAPP/met weakness. I was too optimistic, apparently.
NRP doesn't give mine-by-mine disclosures until year end. In the 10-Qs it just discloses production and royalties by region. 2013 IB production is only up 1.8 million tons thru Q3; I'm guessing all of this is Hillsboro, since 2012 production at the mine was really low until the long wall opened. But IB royalties (in dollars) only increased $ 5 million, which is about $ 3/ton. So either production is down at the other IB mines, or the sales price that Foresight is getting for its coal is low. Either way, not good.
Maybe NRP will have something good to say when it reports Q4, with 2014 guidance. But I don't see how. CAPP is dying, NRP's Illinois Basin mines aren't making up for CAPP, and the OCIW restructuring will eliminate a lot of DCF in 2014. And as someone else posted, financing for new ventures is getting expensive.
I have been waiting for the very big downward movement before year end that someone on this board predicted a few weeks back for a buying opportunity. Sorry, it's the Christmas season and I should be nice, but I couldn't resist. Hope you are having a good holiday season.
At least today, the ex dividend date added to the drop. But most of the REITs I follow are down today, and NHI's drop (ignoring the ex effect) is in line with the others. Does not seem to be anything specific to NHI.
One of the biggest beneficiaries of the midterm elections may be the US coal sector. The vulnerable Democrats up for reelection in Republican states will be forced towards a more coal friendly policy and the administration is likely to ease up on attacking coal to improve Democratic chances in these states. On top of that, should the Republican Party gain enough seats in the mid-term elections, the President’s environmental policy could enter a stalemate for the remainder of his term. Fighting coal has been at the forefront of the environmental policy of the administration and the resulting relief could help improve conditions in the sector.
I think this is wishful thinking, but they printed it. I would put more hope in a cold winter and a reversal of recent years' drop in lectricity usage rather than the elections, but it's early.