They aren't closing the mines on NRP's properties, which is the only thing I was interested in. They are still trying to sell all of their met coal mines; a sale would indicate that the buyer would continue to pay NRP royalties. But they haven't found an acceptable buyer (or acceptable offer) yet.
First, over the past 2 months there have been numerous articles about the attorney that falsely billed SYX several million dollars (through his law firm). He pleaded guilty and apparently he has been making restitution. Since the fraud went through his law firm, I assume SYX has been made whole through insurance, and he's now paying back the insurer.
Anyway, more from today's Newsday (web site, probably in tomorrow's paper edition): Systemax discloses investigation by Miami U.S. Attorney over conflicts, book keeping - Federal prosecutors are investigating Port Washington electronics retailer Systemax Inc. after two of its former executives pleaded guilty in a multimillion-dollar bribery case, the company disclosed in a public filing.
The grand jury probe, by the United States Attorney's Office in Miami, is examining possible conflicts of interest of executive officers and scrutinizing Systemax's internal controls and book keeping, the company said in a Jan. 27 filing with the U.S. Securities and Exchange Commission.
It's unclear whether the investigation is targeting current or former company officials.
A Systemax spokesman did not respond to a call seeking comment. A spokeswoman for the U.S. Attorney's office in Miami was not immediately available to comment.
Systemax said in its SEC filing that it does not believe the probe will significantly impact the company's financial results. "However, it is not possible at this time to predict when the current investigation will be completed," the company said.
Systemax's acknowledgment of the investigation comes eight weeks after two brothers who ran Systemax's Florida operations admitted to fraud and tax evasion, saying they accepted a total of $10.1 million in kickbacks. Carl Fiorentino, 57, and Gilbert Fiorentino, 54, are scheduled to be sentenced next month.
The brothers founded TigerDirect, a computer retailer that they sold in 1995 to Systemax. But they continued to run the Miami-based company until 2011, when a whistle-blower sparked an internal investigation.
Federal prosecutors have not disclosed the full extent of the current probe to Systemax, the company said.
Last week, the senior financial officer for one of the company's business units testified before a federal grand jury in the Southern District of Florida pursuant to a subpoena, the filing said.
Systemax's accountants have also received a grand jury subpoena to testify, the filing said.
Between 2011 and 2013, the Securities and Exchange Commission undertook a separate probe into Systemax and did not require the company to take any action, including restating any financial results, in light of the bribery case.
I think Whiting is a pretty good proxy for NRP's oil & gas investment in the Bakken. Whiting is the operator of NRP's investment, and it looks like NRP bought into Whiting's best-producing field.
Value Line (I know, pretty useless these days) had a write-up on Whiting this morning, recommending a buy and saying the longer-term outlook was good. Of course, they also pointed out that Whiting has dropped 70% since August.
Anyway, today's market sure looks like people think oil is bottoming. Of course, 4 months ago, people thought oil was a good deal at $ 90, so take it for what's it worth. But Whiting was up 10% today.
I'm sorry - you said "crash" and I responded saying you had said "massacre". Similar idea, but massacre overstates what you said. Sorry, my bad.
And my point is that the ex-date shouldn't trigger a crash. The earnings release/2015 forecast may cause some issues, and I don't want to own NRP on the day that comes out. But not yet, I don't think.
Thank you. From the Billy Joel song: "The things I did not know at first I learned by doing twice". That's me, in investing. And most of what I post is based on my prior mistakes.
I agree that someone dumped - the volume is very high today, relative to ARLP's usual trading. And maybe that "someone" had a margin call or some other reason for selling that had nothing to do with ARLP. Or maybe they made a conscious decision to sell ARLP for some of the reasons I mentioned. Or for a reason I know nothing about.
FELP was only directly involved in 1 of my 3 suggestions. And FELP's float is even smaller than ARLPs so it's trading sometimes makes even less sense.
But I just placed a order for some more ARLP, hoping that today's weakness is just for today.
It shouldn't be a massacre. Traditionally, MLPs have traded up in price going up to the ex-dividend date and dropped after that date. But that's not a hard and fast rule; a lot depends on the overall MLP market.
NRP has traded flat to slightly down after the last 4 ex-dividend dates (adjusted for the distribution, of course). Slightly up after the November distribution, pretty flat in May and August and slightly down last February. Considering how weak NRP has been for the last 3 months, I don't expect anything great tomorrow, but I also don't expect any massacre.
And while I've grown to like Ayscuew over the last few years, he does tend to be melodramatic in his description of NRP's trading. To me, a "massacre" would be a dollar drop from here, adjusted for the distribution. I can see a ten or twenty cent drop (that's cents, not percent). Unless there's some news tonight or tomorrow, I can't see that happening.
FWIW, I don't mind tomorrow's risk but I really don't want to own NRP on the day they release Q4 earnings and give their projection for 2015 because that can and will move the unit price. But I don't see tomorrow as anything special.
A few suggestions - ARLP has significant amounts of coal production coming on line this year and next, between Gibson and White Oak (maybe another one as well; I forget the names). There isn't enough demand for the coal, so ARLP said last week that they were planning on producing about 4 million tons less than capacity this year. And that 4 million tons does not include White Oak. So there is a continuing problem with thermal coal demand. And based on what I read on the EIA web site, the price of natural gas hit a new low on Friday, down to $ 2.69. At that price, natural gas is very competitive with coal, at least in areas with access to the natural gas. So again, a problem for demand. That's the biggest overall issue (I guess after regulatory issues).
Second, there is another Illinois Basin coal miner with liots of capacity coming on line over the next year or 2 - Foresight (FELP). FELP doesn't have the utility contracts that ARLP has and it has relied on the export market for a good portion of its sales up to now. But FELP has not entered into a single new contract for the export of coal since January 2014 because the prices are too low. So as their existing export contracts expire, FELP has to find a home for that coal, in addition to its new production.
So while ARLP has indicated some discipline (cutting back production instead of cutting prices) who knows what FELP will do? So there's the second issue - coal prices have been dropping since last winter and maybe they will drop more.
And thirdly, ARLP announced last week that it had acquired 450 million new tons of reserves. I, for one, wanted them to either pay down debt or increase the distribution; anything except invest in more coal properties. They presumably got great prices (it's hard to tell - some of the new reserves are leased, and the royalty rates weren't disclosed), but they are clearly doubling down on coal.
Or maybe someone just decided to dump their units.
I don't follow XOM, but it's so big that trying to figure out what happened is tough.
First, total refining earnings were $ 497 million, as you said. But that consisted of a $ 498 million profit outside the US, and a $ 1 million loss in the US. So things were even worse than the headline would indicate.
But that number was for US downstream overall, not just the refining operation. The company said that "Stronger marketing and non-U.S. refining margins, mostly offset by weaker U.S. refining margins, increased earnings by a net $40 million. Volume and mix effects increased earnings by $20 million. All other items, primarily higher expenses and unfavorable tax effects, decreased earnings by $480 million." So refining margins were weaker, expenses were higher and I have no idea how they would allocate the tax expense between domestic and foreign.
I'm not arguing with you; clearly XOM's US refining business was hurting in Q4. But I don't know from the earnings release where the problems were, and whether those problems will affect NTI or not. One thing I wonder about - I assume XOM's refineries use a lot of oil that XOM produces, and I have no idea how their intercompany pricing works.
When companies are as small as NTI (and even Valero/Phillips 66, which are big but nowhere near as big as XOM), they have to give you more detail about operations. XOM simply doesn't give you enough detail about refining to understand what happened.
But we'll see soon enough, when NTI reports.
ANR first gave 60-day WARN notices about these mines in July 2014. They extended the WARN notices twice and have now idled the mines. I think 1 of the mines is part of NRP's Dingess-Rum property but I can't be sure. I think this is the second NRP mine leased to ANR that has partially been idled.
There are other ANR mines that are still under WARN notices. The problem with trying to match up mines is that NRP only lists the overall properties, and it seems like ANR has multiple mines on each property. Each of the mines mentioned by ANR in its various WARN notices has been fairly small production - a few hundred thousand tons at most, while the NRP properties show production in the millions of tons.
Anyway, the closings seem to be met coal mines. If they aren't on NRP properties, good. It will reduce the over-production issues. If they are on NRP properties, we should hear about it on the next earnings release.
Same space, different planets.
Lots of overlap, but HAR is much more high end (and profitable). As of the most recent Q, HAR's pre-tax margin is 8% of sales, VOXX is 2% of sales. YTD, HAR's sales are up 20% while VOXX's sales are down 5%. Probably why HAR sells for 450% of book value and VOXX sells for 50% book value.
But you could say they are in the same space.
Both delivered above-expectations results at their refining segments. The benefits of lower oil feedstock prices didn't all go to customers. In particular, some of VLO's secondary products (sulfur, per coke and LPG) apparently kept their prices better than gasoline did, and that helped a lot. I didn't read the PSX release.
Obviously, neither of them operate in Minnesota or source their feedstock like NTI does. But the results make me optimistic for NTI's results. In particular, NTI makes a lot of asphalt and I have no idea what's happened to asphalt prices. Maybe they haven't tanked as much as gasoline.
I think I'll buy a few more units. I'm certainly not selling what I own.
And another refiner announced results that I didn't read - Delta Airlines. Sounds funny, but Delta bought a refiner somewhere in the East as a hedge against rising jet fuel prices. When Delta reported Q4 numbers, apparently the refinery helped a lot. Also not relevant to NTI (different area, different sourcing, presumably different products), but a good sign, nonetheless.
I didn't quite get $ 9, but I bought back in at $ 9.03 almost at the close today.
As I said previously, my last buy was in my IRA and I didn't want to get any income allocated to me on the K-1 (UBTI concerns) so I sold the NRP in my IRA yesterday. For a while yesterday it looked like I wouldn't be able to buy back in cheaper, but today I got the opportunity and took it.
I'm not sure why, really. ARLP reported good results and with 1 risk that bothers me, 2015 should be a decent year also. They have pre-sold about 95% of 2015 production, with an ability to sell a few more tons if things pick up at all. And ARLP never moved up today and closed down. Ugly market.
And on ARLP's call, they indicated just how bad things are. They weren't as pessimistic as BTU was yesterday, but things are really tough. They think half of eastern coal is cash flow negative at the mine (category # 1 from my post yesterday). CAPP is simply dead and isn't coming back in 2015. The strong dollar is killing coal exports (met coal) so that looks dead for 2015. I thought that lower diesel costs would be a benefit for coal miners, but ARLP says that mostly helps surface mines (out west, not underground eastern coal mines). Even in the Illinois Basin, FELP relies too much on the spot market and exports. That will hurt NRP.
NRP will get its minimum royalty, unless the miners file for bankruptcy. OCI Wyoming and aggregates (assuming aggregates are doing well) can't hold up the fort. And I still haven't heard much good from Whiting Petroleum and the Bakken.
But I held my nose and bought. For how long, I can't say. I'm inclined not to own NRP on the day they announce Q4 results and the 2015 outlook.
But for those with a strong stomach, $ 9 might be a great place to buy. But I would save some money to double down when it drops again.
Sorry, I forgot an important point. The drop in oil prices helps reduce mining costs, but not as much as we hoped. ARLP said it's a bigger benefit for surface mines, not for underground mines like the ones ARLP has. They said they were modeling $ 65 oil in their 2015 projections, and if oil stayed where it is now ($ 45 or so), it might cut costs by $ 5 million. So $ 20 oil price change means $ 5 MM in profits. Better than a poke in the eye with a sharp stick, but not really meaningful. It also makes me wonder about some of the savings shown on teh Seeking Alpha article.
There were a lot of moving parts in the 2015 projection. You're right - 2015 capital expenditures are expected to be similar to 2014, but there's huge decrease in the investments at White Oak - just a shade under $ 100 MM in 2014 down to less than $ 10 MM in 2015. Even adding in $ 15 MM for the new oil & gas investments nets a to a huge reduction in cash outlays. They also said that they pushed about $ 30 MM of 2014 cap ex back into 2015, and it's possible that they will push a similar amount out of 2015 into 2016, so there's more cash flow.
They expect the inventory build to reverse in 2015, which should add maybe $ 40 MM or a bit more to cash flow. The said they've already seen an improvement in railroad deliveries in December and January.
And they expect a $ 30 MM swing in EBITDA from White Oak in 2015, going from a $ 3 MM deficit in 2014 to $ 30 MM positive in 2015.
But there are offsets. Because they don't expect to produce coal at full capacity in 2015, they will have to charge their mining and overhead costs over a smaller level of production, increasing the cost per ton. They are expecting 2% - 3% lower pricing in 2015. Then there's the lawsuit about the customer breach of contract.
And the comment about accelerating depletion for the Hopkins mine puzzles me. In ARLP's last 10-K, they said that Hopkins had 35 MM tons of reserves, 1/3 owned and the rest leased. They mined 3 MM tons of coal at the mine in 2013 and I'm not sure how much in 2014. But the mine is apparently depleting its reserves in 2015. I'm sure there's more to the explanation and we'll see it in the 10-K.
Anyway, sometimes I think I'd be better off if I just bought stock in a company and ignored all the news. Since almost all coal-related news is bad (for the miners and investors), I keep finding reasons not to stay with ARLP. So far, I've ignored those reasons, and counted the days until the next presidential election.
You may have listened to the call. If you did, ignore my answer.
The customer breach is prospective; it hasn't happened yet but it will in April.
ARLP has a contract to sell between 700,000 and 800,000 tons of coal per year to autility, from now through 2020. The utility has told ARLP that they will not honor the contract because of the MATS (mercury) rules going into effect in April. ARLP has sued; on the call they said that they don't think any of their customers can break a contract because of the MATS rule. They also pointed out that the Supreme Court is considering the MATS rule in the current term. They did not say if they agree that the coal in question actually exceeds whatever limits the MATS rule imposes. they just said that they don't think the customer can break the contract for that reason.
A follow on question was asked if other customers might try to not take deliveries for the same reason. The answer again was that ARLP doesn't think its current contracts give any customer the right to break the contract for this reason.
They did not say that the fact that the contract price was above-market caused the customer breach. They just said that the contract prices were above market.
ARLP said they continue to sell coal to the same customer, some under contract and some on the spot market, so it's just the 1 contract that's a problem, I guess.
I have to listen to these calls several times to get everything straight; hopefully Seeking Alpha will make my life easier with a transcript, so take the following with a grain of salt - maybe I heard wrong. The 2nd question asked on the call was about guidance for 2015 and that's when they talked about the contract breach. I don't know if the disputed contract is still in their guidance for 2015/2016 or not.
FWIW. Maybe it's a big deal, maybe not.
Don't put too much faith in the EPS number. ARLP is one of the very few MLPs that doesn't distribute all of its income, much less its cash flow. There are 2 ways that GAAP allows the undistributed earnings to be allocated - ARLP allocates them all to the LP units, even though AHGP will get half of those earnings when they are eventually distributed. Other MLPs, like HCLP, divide the undistributed earnings between the LPs and the IDRs. Both methods are GAAP and I'm not criticizing either company's reporting. I'm just pointing out that ARLP's method has the effect of increasing ARLP's reported EPS and reducing AHGP's reported EPS. Take the EPS number with a grain of salt.
Sorry, I have problems reading on screen. I missed and still can't find the reference to the customer breach. Could you point me to the place in the release where it is mentioned?
As to your estimates being off, I wasn't taking any shots at you. Your estimates have been far better than mine for the last 2 quarters, which is why I didn't post my guess this time.