Thank you. I couldn't figure out the connection between FLIC and the other 4 banks. I also am impressed that you saw my post and took the time to reply. Thanks again.
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.
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.
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.
Actually, I think the news was great. This is the first Q in quite a while that ABR showed an operating profit. In recent Qs, ABR has been making money, but mostly by buying back its own debt at a discount. ABR did this again in Q1, but it also made an operating profit.
The per-share amount is misleading, tho. It was based on 33 million shares outstanding, but ABR now has 43 million outstanding, due to the secondary and the ATM agreement ABR entered into in December. I hope they can put the money to work fairly quickly.
But whatever the per-share amount, the fact that they have started making an operating profit is great news.
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.
Thank you. I had forgotten the soda ash acquisition. IT makes sense to diversify, especially when coal is hated as much as it is. Even when things go well, the miners don't get credit, and when the stuff hits the fan, they get killed.
I thought PVR overpaid for Chief Gathering, and it is a huge bet for a company the size of PVR, so I sold. I like the idea that NRP has expanded to other natural resources, but kept the royalty model. None of the acquired businesses are big enough to move NRP away from coal a whole lot, but they help. I also think they own some fracking sand operation.
I don't see the Wall Street Journal connection, but I wouldn't put much faith in The Street's recommendations. I don't want to argue too much because that might make you think I'm arguing against NRP, which I am not. I just don't like The Street (or Motley Fool). Today, most of The Street's arguments are based on some computer comparing 2012 results (or Q4 results) to 1 year earlier. 1 year earlier, NRP has several impairment charges that killed GAAP EPS for 2011 and especially Q4 2011. So 2012 looked great in comparison. If you adjust for unusual items such as impairments, NRP's comparisons wouldn't have looked so good. Only a computer wouldn't have noticed.
Under $ 22 a buy? Maybe, depending on what NRP says in its earnings release. It really feels like coal is hitting bottom (as an investment, maybe not if I were a miner). There are a few things we need to keep it going - China picking up steel demand, and nat gas prices continuing to rise would be nice.
I'm not sure I understand you. You refer to potash, but I didn't think NRP was involved in potash. Are you referring to the soda ash acquisition that NRP made in late January? I ignored it for Q1 because NRP only owned it for 2 months. Also, I have no idea how to estimate/guess at its effect on cash flow and profits. And soda ash is used in industrial operations, not agricultural. But if you saw potash, you're probably right and I mus have missed it.
Generally I ignore everything except coal royalties for NRP, because that's where the money is. In 2012, coal royalties amounted to about 70% of NRP's gross revenues, but almost 90% of cash flow. It's not quite at 90% of GAAP earnings because of noncash depreciation and amortization expenses, but it's pretty high.
I give NRP credit for trying to diversify away from coal, but it takes a while to accomplish the goal. PVR (also was a coal royalty MLP) has tried to diversify away from coal with 1 big acquisition in the Marcellus, and I didn't like betting the farm on 1 deal. So I like NRP's more gradual approach. I just don't see it paying big dividends in Q1. It would be nice to be wrong, except that I don't currently own any NRP and I'm hoping for a drop after the earnings release to buy in.
Anyway, any information you can post about potash and NRP would be helpful. I tried a quick look at the web site and didn't see anything.
Sorry, I have to retract my guess. I don't think the incentive comp or property tax adjustments will change much this year; NRP has them every year in Q1, which is why CAD is so weak in Q1 every year. But I had forgotten that Q1 2012 included the $ 9.6 million minimum royalty when the Gatling mine closed. That obviously won't recur. So that's another 9 cents off the cash available for distribution. So my new guess is 20 cents or a bit less.
And if it makes things easier, my name is Jim.
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.
Never mind; I see May 6, after the market closes, on Schwab. Of course, E*trade shows that earnings will be released on this Friday after the market closes. So I guess we'll just have to wait and see.
Where did you see the May 6 date? I don't see it on the company's web site. Actually, the reason I visited this board now is that for the last 3 years, Q1 results have always been released on the first Wednesday of May, which is today. So I was expecting to see the news tonight. My vague recollection is that the release is always late in the day/night, but I was expecting it way before next week.
Met coal prices seem to have fallen quite a bit, and CNX is a good example. From $ 168/ton in Q1 2012 to $ 103/ton in Q1 2013 for the low-vol met coal from Buchanan, a drop in price of just under 40%. The sample size is small, and may not be meaningful to other operators. But the point is that a good part of NRP's royalty income is based on the market price of the coal. A 40% drop in the price of met coal compared to Q1 2012 would really hurt NRP. SunCoke also showed a 30% drop in met coal pricing in Q1 vs last year's Q1. Not a good sign.
Hello, ayscuew. Thought I'd come back for a visit. I have no idea what to expect for Q1, but I'm interested. PVR's coal royalties dropped almost 33% in Q1 this year vs Q1 of last year, mostly due to lower CAPP production and lower royalty rates - all thermal, so I expected NRP to get hit on both sides, met and thermal. Then ARLP reported absolutely great numbers for Q1 - again, all thermal and mostly Illinois Basin. So I have no idea what to expect for NRP's thermal coal leases. PVR has not been a good indicator of NRP's thermal coal results, but neither has ARLP. CAPP is clearly a disaster and NRP hasn't moved enough into IB to make a difference, I think.
I haven't tried to follow met coal since I exited NRP last year so maybe I'm missing something.
We'll see soon enough.
I don't think I understand you. In my case (I owned WPZ in 2011 and had no sales of units in 2011), the effect of amending returns would be to increase my 2011 passive loss carryover by $ 1,200, and reduce my 2012 passive loss carryover by the same amount. I have to assume that when I eventually sell, WPZ will be able to figure out the correct amount of ordinary income on sale.
If you did not own WPZ in 2011, then I think your 2012 K-1 does not reflect any correction from 2011. So this whole thing would not affect you.
Or am I misunderstanding your point?
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.
LNCO doesn't have qualified dividends either. In 2012, and probably for the foreseeable future, LNCO's dividends are tax-deferred return of capital. So low bracket investors still pay tax on the dividends, at capital gains rates, when they sell.