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jrad52 244 posts  |  Last Activity: 12 hours ago Member since: Jul 25, 1999
  • Reply to

    More bad coal news!

    by ayscuew 12 hours ago

    Why is that bad news? You might recall someone on this board saying the problem with coal was that the coal miners were keeping mines open, even if they were unprofitable, hoping for better times. Less supply should be good news, shouldn't it?

  • jrad52 jrad52 Apr 15, 2014 10:16 PM Flag

    You have been posting nonsense like this on MSN's board for months now. MSN is toxic. They show 3 or 4 pages of related party transactions with the bankrupt majority parent company. No one would buy MSN without getting out of those deals, and I doubt the parent company will give up those deals without getting paid quite a bit for them. Throw in the IRS exam, which is likely to use up quite a bit of the cash on the balance sheet, and you have a remarkably unattractive target. Throw in the parent company's bankruptcy proceeding and things are even muddier. Then there's the issue of MSN's basic business tanking. Sales down 40% year-to-date, operating profit down even more. But it's all the dealings with Grande that make a sale of MSN to anyone extremely unlikely. Boy, is MSN ugly.

  • Reply to

    Trading 4/15/2014

    by ayscuew Apr 15, 2014 10:06 AM
    jrad52 jrad52 Apr 15, 2014 7:50 PM Flag

    I haven't paid enough attention to the Ct of Appeals decision, but my understanding is that its biggest effect is on CAPP coal (another nail in the coffin?), which certainly hurts NRP. It is surprising to me, but something like 30% of coal-fired power plants still don't use scrubbers. They can get away with this by using CAPP coal (and PRB, I guess, but the energy differential makes comparisons difficult). CAPP coal is lower-sulfur and cleaner, so utilities could avoid the expense of installing scrubbers by using CAPP coal. My understanding of the EPA rules that were upheld by the Appeals Court is that the only way to achieve the lower pollution caps imposed by the EPA is to install scrubbers. So if you're a utility, you have 2 choices - don't install the scrubbers and replace the coal-fired plants with nat gas-fired ones, or install the scrubbers and switch to cheaper IB coal. Neither choice is good news for CAPP miners, and 40% of 2013 production at NRP's mines and 50% of NRP's 2013 royalties still come from CAPP. Of course, a lot of the CAPP production at NRP's mines is met coal, not thermal, and that isn't affected by the decision. On the other hand, the met coal production has its own set of problems, starting with price.


  • Reply to

    Coal market

    by jbcguy Apr 15, 2014 12:32 PM
    jrad52 jrad52 Apr 15, 2014 7:37 PM Flag

    I don't think that PRB prices affect most midwest coal, and they don't affect CAPP or NAPP prices at all. Per the DOE, since 1/1/2013, weekly spot prices for PRB coal have increased 28.3% (from $ 10.15 to $ 13.02 per ton). During the same time period, CAPP spot prices have actually dropped 8.9%. IB prices are flat, and NAPP prices are up 11%. Not a whole lot of correlation. I went back into 2012, and I still don't see any correlation. The problem is that even with PRB coal going up 28% in price, CAPP coal is still 4 or 5 times as expensive ($ $60.58/ton versus $ 13.02/ton at April 7 2014). CAPP coal has a lot more energy per ton, but even adjusting for that, CAPP coal is more than twice as expensive as PRB coal. If you throw in any transportation costs, CAPP simply doesn't compete with PRB. My understanding is that the only coal that competes with PRB is IB, and that is only competitive in areas close to the IB where the transportation costs favor IB.

    I guess if you look at this from the perspective of PRB coal, the rise in price and the transportation problems make it harder for PRB to take even more market share from eastern coal. So that should help IB, CAPP and NAPP to some extent, but this hasn't shown up in the prices yet.

    I could be wrong; it wouldn't be the first time, or the last.

  • Reply to

    Coal market

    by jbcguy Apr 15, 2014 12:32 PM
    jrad52 jrad52 Apr 15, 2014 3:47 PM Flag

    NRP has very little exposure to western coal, so it isn't directly affected by PRB problems.

    If anyone benefits from western coal problems, it would seem to be Illinois Basin coal more than CAPP coal, because of geography. There are some areas where geography says that no one can replace western coal (like the western states, esp Texas); and there are other areas that might be up for grabs (in the midwest). I was surprised to learn how much western coal is shipped to Illinois utilities, for example. Chris Cline, one of NRP's major owners, and the controlling owner of Foresight coal, has been in the press over the last 2 years, trying to get Illinois utilities to switch to his IB coal, without any notable success. But maybe if PRB coal prices rise or the supply becomes less reliable, IB coal will benefit. But western coal prices are extremely low, even compared to IB, which in turn is far lower than CAPP. BTW, western coal's energy content is also far lower than IB or CAPP coal. I don't know how to compare the different coals on a practical basis. But I don't think any of this affects NRP much.


  • Reply to

    From the Foresight Energy S-1

    by jrad52 Apr 14, 2014 12:16 PM
    jrad52 jrad52 Apr 14, 2014 2:15 PM Flag

    I have no access to the report and my experience is that they charge a fortune for mostly re-packaged information, so I'm not likely to ever see it.

  • Foresight and NRP already have a significant business relationship, and Foresight is obligated to offer certain business opportunities to NRP. The S-1 states "We expect to consummate additioanl deals under the Restricted Business Contribution Agreement in the future, including an offer to NRP to purchase certain infrastructure assets at Hillsboro and a dock servicing mining projects in Southern Illinois."

    So NRP will presumably invest more in coal handling assets.


  • Neutral rating, TP $ 26. Summary: The subordinated non-Agency and DTAs have AI as 1 of the most levered to continued credit improvement, which could drive higher book value. The migration into more Agency, however, is likely to limit any price to book multiple expansion.


  • Reply to

    Mr. Cline selling his units?

    by jrad52 Apr 12, 2014 2:04 PM
    jrad52 jrad52 Apr 13, 2014 1:16 PM Flag

    You're being too dramatic. "Obvious Cline sees NO future in the coal business"? Sorry, but that's simply wrong.

    Mr Cline's major business is Foresight Energy, which BTW recently updated its S-1 to try to go public again. (Aside - a coal MLP IPO? In 2014?). That business is worth north of $ 1 billion, even today. Foresight is also one of NRP's major lessees and business partners, with Foresight paying NRP around $ 90 MM per year in 2013, plus another $ 20 MM in minimum royalties that haven't been recognized as income yet.

    Mr Cline has sold significant amounts of NRP in recent years, most recently selling 6 MM units in March 2011 for $ 208 MM. (Think of it; almost $ 35/unit. Think he knew what was coming? If he did, he should have sold more.)

    The updated S-1 filed by Foresight contains about 4 pages of related party transactions with NRP, with much more detail on a mine-by-mine basis than NRP gives. The strangest thing (so far, at least; I haven't finished reading) is the Macoupin mine. Foresight must have had great plans for this mine because it's paying NRP $ 16 MM per year in minimum royalties, plus other costs, but Macoupin's production has dropped from 1.8 MM tons in 2012 to 0.7 MM tons in 2013. There must be some problem at the mine.

    Anyway, more after April 15, maybe.

  • Last night, NRP filed with the SEC to register for sale the remaining units owned by Mr Cline and his family. He has quite a few entities that have owned NRP in the past that made it hard (for me, at least) to track changes in his ownership. But this filing is pretty clear - He and his family currently own about 10.5 million NRP units. NRP is registering 10 million of them for sale; the other 500,000 units were registered for sale last May, but were not sold.

    This doesn't mean that there will necessarily be a secondary or that the units will all be sold in one deal. It doesn't even mean that any units will be sold, although you'd have to wonder why he would go through the expense of a reg statement if he didn't mean to sell any units. The registration simply allows the units to be sold in the open market. But Mr Cline has been reducing his ownership in NRP fairly regularly in recent years, and these are the last of his units.

    It will be interesting (and maybe disappointing) to see if he is willing to accept $ 16 for his units. He didn't sell any of the units that were registered last May, and he could have gotten over $ 20 at that time.

  • Reply to

    ADF acquisition

    by jrad52 Apr 4, 2014 1:34 PM
    jrad52 jrad52 Apr 5, 2014 2:30 PM Flag

    I don't think there's a correlation between M&A activity and UBTI, In fact, if the M&A is done for cash/debt, there will be an increase in depreciation expense which reduces taxable income and UBTI. And to the extent that the M&A involves acquiring a subsidiary corporation, the MLP's income would be dividends and (possibly interest) income, which isn't UBTI.

  • Reply to

    6 year low for met coal

    by ayscuew Mar 26, 2014 12:56 PM
    jrad52 jrad52 Apr 5, 2014 8:34 AM Flag

    Biy was my math wrong. Good catch.

  • Reply to

    K-1s out tonight

    by jrad52 Mar 21, 2014 8:11 PM
    jrad52 jrad52 Apr 4, 2014 8:57 PM Flag

    Did your uncle get ETE units in exchange for Southern Union stock? If yes, I can give you a guess about his high tax liability. Otherwise, I'd have to ask what his "normal" tax liability is.

  • CLMT announced its acquisition of Anchor Drilling Fluids recently; the deal may have closed by now. I own stock in ACAS, which was the biggest shareholder in ADF, and I saw its announcement about the deal. That announcement was interesting.

    CLMT actually purchased the stock of a chain of corporations, headed by ADF Holdings Inc. Slightly unusual for an MLP, because there’s no tax basis step up in a stock purchase, and there will be continuing corporate taxes on ADF’s earnings. This has happened before – LINE purchased the stock of BRY, but they used LNCO (a C Corp investor in LINE) to actually make the acquisition; as a corporation, LNCO was able to liquidate BRY tax-free and sell assets to LINE. Also some MLPs have C Corporation subsidiaries, like NTI (another refiner) owning the gas station/bakery chain. But that structure was done because the bakery receipts are not MLP-qualified revenue. More to the point, the ETE group of companies purchased the stock of Southern Union a year or 2 ago, but the structure of that deal was really confusing. So the structure isn’t really new, but I don’t think it’s all that common, either.

    There are ways to reduce the corporate tax, like by charging ADF for parent company services or by having CLMT supply ADF with the raw materials it uses (I’ve been loosely following the posts on this board about the possible connection between refining and drilling fluids, so maybe CLMT can add some business). But the comments about ADF’s debt interest me.

    CLMT said they were purchasing the stock on a debt-free basis. Based on the limited information that ACAS and CLMT have disclosed about ADF, I think ADF had about $ 100 million of debt as of December 31 (that might include the redeemable preferred).

    So I guess the remark about buying the company on a debt-free basis means that ADF’s existing shareholders contributed cash to ADF to pay off the debt, and then sold the stock in the debt-free company to CLMT. Or more likely, the debt was converted into stock in ADF, which was then sold to CLMT. I think the debt conversion makes more sense because it wouldn’t require anyone to come up with cash for a short period.

    ADF didn’t seem to have much GAAP earnings, so maybe the plan was to have CLMT lever up ADF by lending it money which would be immediately dividended back to CLMT. The dividend would be tax-free ROC except to the extent of ADF’s earnings & profits. And if CLMT charges the same interest rate that ADF was already paying, it would be a way to withdraw $ 10 million per year from ADF without incurring a corporate tax. And if they levered up ADF even more, they would withdraw even more.

    Anyway, for those who bother to read this post, this isn’t a criticism of CLMT. I’m interested because the growth in MLPs means that they will be acquiring C Corporations more frequently, and I’d like to see the structures the MLPs are using.

  • For Q1, the average Mt Belvieu propane price was $ 1.32 versus $ 1.20 for Q4. But how we got to the $ 1.32 is interesting, with the March average price down to $ 1.06. Barring any undisclosed shutdowns, Q1 should have been decent.

  • Reply to

    K-1s delayed again

    by jrad52 Mar 28, 2014 4:00 PM
    jrad52 jrad52 Mar 31, 2014 7:48 PM Flag

    Yes, they are out.

  • Reply to

    First quarter trading!

    by ayscuew Mar 31, 2014 5:59 PM
    jrad52 jrad52 Mar 31, 2014 6:26 PM Flag

    You're doing it again. If you make a prediction, don't give a time limit. Although 3 quarters is a pretty long time. :)

  • The 6.50% Senior Notes due 2021 ..."were issued at par for net proceeds of approximately $884.1 million, after deducting the initial purchasers' discount..." (and certain expenses). It's meaningless, I know, but you have to laugh sometimes. How do you issue something at par but still give the first purchasers a discount?

    I will say this, though. The purchasers of the 9 3/8% 2019 notes made an absolute killing. Those notes were issued at fairly significant discounts (1 tranche went out at 93 cents on the dollar), so their yield was probably more than 10%. And when they are redeemed, they get an extra payment to reflect a year's worth of interest, discounted back to today at federal government borrowing rates.

    Right now, CLMT's debt makes up about 60% of total capital, which is way higher than its historical average. After the $ 300 MM unit offering/ATM sale/whatever, it will still be high, but a bit more manageable.

  • Reply to

    Restatement of 2013 quarterly results

    by jrad52 Mar 13, 2014 9:39 AM
    jrad52 jrad52 Mar 31, 2014 9:56 AM Flag

    Like I said, the RIN restatement bumped Q4 EPS quite a bit. I'm not sure I understand the market's reaction today (on very light volume), but I'll take it. Probably the jump just puts us back to where we were before the original announcement of the restatement.

    In today's release, they threw in a comment to the effect that the RIN restated 10-Qs will also reflect some other other corrections they just found. I assume they are immaterial, but we'll see.

    Now that they have the accounting fixed, maybe they can finalize the tax filings. I'm sure it will take a few days unless they already had the GAAP numbers late last week.

  • Reply to

    6 year low for met coal

    by ayscuew Mar 26, 2014 12:56 PM
    jrad52 jrad52 Mar 30, 2014 5:18 PM Flag

    It's tax season and I don't have much time to post these days. But I read the Seeking Alpha article again and it's misleading, to say the least. Just looking at the part where it discusses natural gas production in the Marcellus, here are the problems:
    The article mentions the legacy decline rate of 45 million cubic feet per day in March rising to over 100 million cubic feet per day in April. Per the EIA March report, the total decline rate is currently about 360 million cubic feet per day. And the rate of decline, as the article notes, is increasing; it looks like the total rate of decline for legacy wells is about 340 million cubic feet per day. Fair enough and looks bad.
    But daily production in the Marcellus is around 14 billion cubic feet per day and new production is way more than offsetting the production decline in the legacy wells. Per the same report, the natural gas rig count in the Marcellus is about 100, and the average production of the new wells is over 6,000 cubic feet per day, or over 630 million cubic per day in total, almost double the legacy decline. And more importantly, the natural gas production per new rig is also skyrocketing – it looks to be about 5 times as high as it was in 2010. In fact, the EIA chart indicates that total natural gas production in the Marcellus averaged maybe 12 billion cubic feet per day versus more than 14 billion cubic feet per day now. So the article mentions the negative part of the Marcellus story – shale gas wells are depleting faster than people originally projected (same all over the US with Shale gas, BTW). But it ignores the other story, about how new wells are more than replacing the legacy declines. Not too objective.

    As the EIA stated in Short Term Energy Outlook March 2014: “Rapid natural gas production growth in the Marcellus formation is causing natural gas forward prices in the Northeast to fall even with or below Henry Hub prices outside of peak-demand winter months. Consequently, some drilling activity may move away from the Marcellus back to Gulf Coast plays such as the Haynesville and Barnett, where prices are closer to the Henry Hub spot price.” So even if production slows in the Marcellus, it’s for the wrong reason (from coal’s perspective) – there’s not enough capacity to move the natural gas where it’s needed, and the price of natural gas in the Marcellus region will probably stay low. Unfortunately, the Marcellus overlaps a lot of the coal producing and coal using region.

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