Vanguard Global ex-US Real Estate ETF Message Board

May 6 - has a story about a $ 90 million fraudulent loan scheme. One of the 5 banks that supposedly lost money in the scam was FLIC. No mention of the bank's share of the possible loss.

FWIW

CS maintains its Outperform rating. It values EVEP's core business at $ 46/unit, plus it values the acreage to be sold at a minimum of $ 11/unit for a total value of $ 57/unit. It tempted me to buy some EVEP for a short swing gamble until I read the report. Included in the $ 46 value for the core business is $ 20/unit for acquisitions to be made in the next 5 years. CS says that EVEP has a track record of such acquisitions, largely involving the company's sponsor, and CS is comfortable that it will continue to make good accretive acquisitions. So almost half of their valuation is for assets that EVEP doesn't own yet. I think I'll pass. It will be interesting to see if the report has any effect on EVEP's price today, though. The headline looked nice.

CS says that ANR has priced 5 million tons of met coal at $ 87/ton. This is way lower than the Q1 numbers, which were bad enough. The spot market seems to be terrible. ANR is NRP's largest lessee in CAPP, and mines a bunch of met coal there. I don't know how much met coal ANR mines on NRP's properties, so this may or may not directly affect NRP. Again, more stuff for NRP to comment on, maybe.

There’s an article on the WSJ web site, I sssume it will be in tomorrow’s paper edition. No hard news, just a story about coal’s comeback in the Illinois Basin, at the expense of Central App. Illinois Basin coal seams tend to be thicker than CAAP’s, so mining them is cheaper than mining in CAPP. The article says that mining coal in the IB is half as expensive as mining it in CAPP (nonunion labor helps), which makes it cheaper to use even though transportation costs to the utilities are higher. IB’s coal has higher sulfur content, but with utilities using scrubbers, this is less of a problem.

Anyway, the article projects that IB will outproduce CAPP in coal within the next few years.

BTW, the article is about steam coal, not met.

Unfortunately for NRP, 45% of its steam coal reserves are in CAPP, while only 19% are in IB.

The article is consistent with comments from NRP about its CAPP lessees cutting back production. It is also consistent with ARLP’s (which is mostly IB) recent results. Maybe we’ll hear what NRP has to say about current developments.

FWIW

I have no skin in this game. I owned LNCO from its IPO until a week or so ago when the premium to LINE increased to $ 4.50 which made no sense. So I don’t really care if LINE soars or tanks on Monday or thereafter.

My only point is that all of the production MLPs have sucked wind for the last 2 years. They all talk about how oily they are, or how oily they are becoming, but they are still big in nat gas and NGLs and have done terribly. I ran a 2-year comparison chart of LINE, BBEP, EVEP, PSE, and VNR and all show negative returns over the 2 year period. I think Yahoo does not include distributions in its charts, so the chart understates the actual return. But even including distributions would show returns for all of them less than the distributions they pay.

Same thing for a 1-year chart, except BBEP (which I own, but probably not for long) is slightly positive for the 1 year period.

I assume this is because of bad nat gas pricing for the past 2 years, and bad NGL pricing for the past year. And they have been buying oil properties recently, just as oil prices are dropping.

I only follow LINE and BBEP and both of them have been buying properties regularly in the past few years, without any apparent benefit to the bottom line DCF. I suspect, but have not checked, that this is true of all of them. So they are running hard just to stay in place. This can’t be due to the “put accounting” issue that the hedge funds complain about with LINE; the problem is across the board, although the put accounting may disguise the problem at LINE.

I suspect the problem is that they are all chasing the same fields and are overpaying for fields with short lives, doing whatever they can to maintain or slightly increase the current distribution. But I don’t know enough about oil and gas properties to be sure of anything, except that these have not been the MLPs to own in recent years. And unless you think that energy prices are going to rise a whole lot in the next year.

has another really negative article on LINE. Still referring to the accounting for hedges/puts, but also declining production even with lots of acquisitions. Barron's last article on LINE didn't have much effect. We'll see this time, but I would at least expect a hit on Monday.
FWIW

Now that most coal mine operators have reported, we can guess a bit about NRP’s results.

In Northern App, NRP’s major lessees are CNX (Hibbs Run) and ARLP (Beaver Creek). I think this is ARLP’s only mine in NAPP, so it’s easy to match up. Price and production were flat with Q1 2012. You can’t match up the CNX mine with any specific disclosure given out by CNX, but in 2012, the mine produced about 33% of CNX’s thermal coal. In Q1, CNX’s price and production of thermal coal were down about 5% from Q1 2012. This should have no effect on NRP since the royalty on this mine is a low fixed rate.

In CAPP, NRP’s major lessees are ANR, ACI and Patriot. Patriot is in bankruptcy, and it’s not that big a lessee, so no information or impact there. ANR disclosed that in Q1 2013, its Eastern Steam Coal division had about 17% lower volume and 5% lower prices than in Q1 2012. ANR accounted for almost 25% of the production at NRP mines, so this certainly indicates a major hit to NRP’s CAPP results. No surprise there.

In Southern App, which I think has the majority of NRP’s met coal, the major lessee is CLF. CLF disclosed essentially flat met coal production overall and 10% lower prices in Q1 versus Q1 last year.

So my guess is that NRP’s coal royalties, which were $ 59.9 million in Q1 2012 ($ 28 million met coal, the rest thermal), will probably fall to the low $ 50 million range. My rough calculation shows around $ 52 million. The revenue drop basically all falls to the bottom line, so I would expect EPS to drop to about 40 cents, excepting any unusual items. CAD is always weak in Q1; last year it was only about 34 cents per unit, so I expect it to drop to about 27 cents. Not enough to jeopardize the distribution yet, but getting closer.

FWIW. I’m probably off by a mile, but we’ll see.

Certainly seems like some news leaked, and it isn't very good.

I just received a letter from WPZ saying that it had entered into a closing agreement with the IRS regarding its 2011 tax return. I assume others on this board that owned WPZ have received or will receive on Monday the same letter. Apparently WPZ understated its Line 1 loss on the 2011 K-1s - for me, the corrected loss for 2011 was about $ 1,200 higher than the K-1 showed. The agreement WPZ entered into with the IRS allowed WPZ to add the extra loss to the 2012 K-1s. Confusing, but if you didn't sell any WPZ units in 2011, you don't have to do anything. If you did sell units in 2011, you are allowed, but not required, to amend your returns. The extra loss would reduce your tax basis when you sold, so I would think there's not likely to be any real impact in that case, either.

Anyway, this is the first time I have ever heard of an MLP having this problem. This doesn't seem to be the result of an IRS exam - it's too quick for the exam process to have been completed on a 2011 tax return. So I guess WPZ found the problem and contacted the IRS.

Interesting, but for almost everyone, meaningless.