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PetroLogistics LP Message Board

jrad52 126 posts  |  Last Activity: 3 hours ago Member since: Jul 25, 1999
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  • Reply to

    Coal news gets worse

    by ayscuew 5 hours ago

    And how about this one today (stolen from IV): Fitch Ratings has downgraded the Issuer Default Rating (IDR) of Teck Resources Limited (Teck; NYSE: TCK; TSE: TCKb) to 'BB+' from 'BBB-' along with Teck's outstanding debt. The Rating Outlook remains Negative. About C$9.1 billion in debt and US$4.2 billion in senior unsecured credit facilities are affected by these rating actions.

    With the slowdown in China, Fitch believes there is an elevated risk that metal and metallurgical coal prices will be lower for longer, delaying Teck's ability to generate free cash flow (FCF) and reduce financial leverage to levels where funds from operations (FFO) adjusted leverage is less than 3x and FFO fixed charge coverage is greater than 6x through 2020.

    NRP's average royalty rate per ton of met coal, by year:

    2011 - $ 7.52

    2012 - $ 6.58

    2013 - $ 5.50

    2014 - $ 4.56

    2015 thru June - $ 4.06

    Tons have stayed reasonably stable, in the 16 million ton per year range, so the drop in price means that met coal royalties are just about half what they were in 2011. Of course, NRP traded around $ 29 4 years ago today, so it's hard to say that any of the above is news to anyone.

  • The August Q hasn't been too good the last 2 years - basically break-even if you exclude unusual items. Couple that with the euro still being 20% lower than it was in the August 2014 quarter, and I think sales will be down again. Normally, the weakness in the euro would reduce sales and also reduce expenses so the impact on the bottom line wouldn't be as bad as the impact on revenues. But VOXX has a lot of corporate overhead in the US and the lower gross profit (in dollars) from Europe means those US dollar overhead expenses will grow as a % of sales or gross profit.

    Maybe we'll hear the costs of the 2 officers leaving, although that happened after quarter-end. Anyway, I'm not looking for much good news tonight. We'll see soon enough, I guess.

  • jrad52 jrad52 Oct 12, 2015 6:48 PM Flag

    No background in coal other than investing in coal MLPs for maybe 10 years. Good investments (ARLP/AHGP, that is) for the most part until the last year when they totally fell apart. ARLP held out the longest but it too has collapsed.

    Your right that NRP does not disclose many specifics about the minimums. When FELP (NRP's largest lessee) went public, it disclosed the minimums on its mines, but those mines are relatively successful. There has been no disclosure on any other mine that I could find.

    But for the last 4 years, production on NRP's properties has run right around 50 MM tons per year. Royalties income on that tonnage hit a peak of $ 280 MM in 2011. Last year the royalties dropped to $ 185 MM. So there's $ 95 MM per year, almost all of which would have reached the bottom lone. So far in 2015, lessee production is on track to reach 50 MM tons again, but royalties are down another 15%. So royalties are close to half of what they were in 2011. That's why I think it is possible that NRP waited too long to start its debt paydown program.

    So I think (1) cash flows will decline from here at least through 2016 - both ARLP and FELP have basically written off getting any significant new contracts before 2017 and they know more than I do. (2) bankruptcy is very unlikely - the only possibility I see of that happening would be if NRP failed a covenant that accelerated a lot of the debt maturities. And what would a lender do? foreclose and take over coal properties? So I don't see BK. and (3) right now the investment in OCI Wyoming (the soda ash business) has saved the company. While I would hate to see NRP give it up, if things get worse I can see NRP selling its interest to OCIR or merging it with OCIR to get some liquidity.


  • jrad52 jrad52 Oct 12, 2015 7:36 AM Flag

    2 points: 1. Some malls get beaten down (neighborhood turns, empty stores, whatever) so even the owner gets hurt. That is what has happened to NRP, big time. Coal is the ugliest neighborhood around and no one wants to shop there any more. BTW, eastern electric utilities have increased their coal inventories tremendously this year, compared to the same time last year. Unless the winter is incredibly cold, we're looking at more bad news.

    and 2. NRP isn't just an owner any more. Over the last 2 1/2 years, NRP has invested nearly $ 1 billion in operating businesses - soda ash (good), aggregates (jury is still out) and oil & gas (terrible so far). These businesses have all the risks of any natural resources operating business. So the mall analogy

  • jrad52 jrad52 Oct 12, 2015 7:25 AM Flag

    No guess on the odds. I have been posting for months that they should try to sell the soda ash business and use the proceeds to pay down debt.

    But here is where the MLP structure hurts them. Selling the interest in OCIW at anywhere near the price that OCI got would result in a gain of at least $ 250 MM, or $ 2 per unit. NRP would first have to pay down the debt that relates to the investment, but then they'd have to make a distribution somewhat equal to the probable tax liability that the partners would incur as a result of the sale. So the debt paydown wouldn't be the full sales proceeds.

    Actually, I'd give higher odds to Mr. Robertson's firm buying out the public unit holders if the price gets much lower.


  • jrad52 jrad52 Oct 11, 2015 7:05 PM Flag

    I think the plan is fine. Now it's all about execution and whether coal prices and production in particular stay at levels that allow for the $ 500 MM debt repayment. It's early days still, and way too soon to say they're likely to succeed. But if they do succeed in paying down the debt, it's a decent speculation. 2 other things that might help are a coal market recovery in 2017 (I think most coal miners have already written off next year), and the results of the presidential election.

  • Has an article out this week about the new OSHA rules for retailers of anhydrous ammonia. Apparently those rules are causing many retailers, especially smaller ones, to stop carrying the product. The rules go into effect 12/31/15 but there are lawsuits trying to delay or kill the new rules.

    About 22% of TNH's sales last year were anhydrous ammonia. TNH has a contract with CF whereby CF takes all TNH's production, so I assume there's no direct effect on TNH. But anything that's bad for AA can't be good for TNH eventually. Unless the issue forces farmers to upgrade from AA to UAN.

  • Reply to

    Learn to read---Please

    by legalking Oct 9, 2015 6:10 PM
    jrad52 jrad52 Oct 10, 2015 7:19 PM Flag

    The automatic DRIP plan is not really automatic, apparently. TCAP, another BDC, also has an "automatic" DRIP plan, and they say on their web site that most brokers automatically opt out of automatic DRIP plans unless the customer wants to be included in the plan.

    So apparently no big deal.

  • Reply to

    Learn to read---Please

    by legalking Oct 9, 2015 6:10 PM
    jrad52 jrad52 Oct 10, 2015 8:28 AM Flag

    Just 1 small point - the current 50 cent dividend won't affect the total amount of the special dividend. The special dividend is supposed to be a distribution of all the accumulated taxable income NEWT and its subsidiaries earned prior to electing BDC status. So that number - $ 34 MM - is carved in stone now. BTW, that is alos why the dividend will be qualified dividend on the shareholders tax returns.


  • Reply to

    Learn to read---Please

    by legalking Oct 9, 2015 6:10 PM
    jrad52 jrad52 Oct 9, 2015 9:06 PM Flag

    The company's disclosures are terrible so I understand your confusion. But there is an automatic DRIP plan. Tonight NEWT filed a final 497 regarding the new share issuance. On page 207 of that document it states: "DIVIDEND REINVESTMENT PLAN
    We have adopted a dividend reinvestment plan that provides for reinvestment of our dividends and other distributions on behalf of our stockholders, unless a stockholder elects to receive cash as provided below. As a result, if our board of directors authorizes, and we declare, a cash distribution, our stockholders who have not “opted out” of our dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of our common stock, rather than receiving the cash distributions."

    So yes, the company has adopted an automatic DRIP, unless you opt out.

    The automatic DRIP plan can now be found on NEWT’s web site under the Investor section. It says: Unless a stockholder specifically elects to receive cash as set forth below, all Cash Distributions hereafter declared by the Board of Directors will be payable in shares of the Common Stock of the Company, and no action will be required on such stockholder’s part to receive a Cash Distribution in Common Stock. (I think this last clause is a mistake since it makes no sense, like a lot of the company's disclosures.) But the plan applies to dividends “hereafter declared”. Since the recent 50 cent dividend was declared before the company adopted the plan, I assume it’s not covered by the plan.

  • Reply to

    Learn to read---Please

    by legalking Oct 9, 2015 6:10 PM
    jrad52 jrad52 Oct 9, 2015 8:58 PM Flag

    From the Form 497: Special Dividend
    On October 1, 2015, our Board declared a special dividend of $3.29 per share, or approximately $34.0 million, payable on December 31, 2015 to common shareholders of record on November 18, 2015.

    The company announced the closing of the secondary today and the 2 MM shares are now outstanding. Since they will be outstanding on November 18, they will get a pro rata share of the $ 34 MM. As a matter of common sense - why would anyone have paid $ 16.50 in the offering if they weren't going to share in the special? The value of all the shares is going to drop by the amount of the special dividend when it trades ex.

    And how in the world would the company track which shares get the special and which don't, since there's no special symbol for the new shares. You might buy 1,000 shares on Monday and you wouldn't be able to tell if you would get the special or not. That makes no sense.

    But this company's disclosures are atrocious. So I sympathize with you. But everyone is going to share in the $ 34 MM.

  • They are really positive on NTI, especially for Q3. They say: "NTI – Has had to revise down throughput guidance to between 86 – 90 kb/d for 3Q, as the result of unplanned maintenance at their St. Paul Park refinery. While unfortunate, as they were setup to benefit from a heavier than normal fall maintenance schedule at competing refineries starting in September, it is important to remember that the refinery was fully up and running during the heart of the summer when the gasoline crack was at its peak."

    CS has increased its estimate of Q3 EBITDA and earnings for NTI by 20% or so. Old estimate for EBITDA was $ 120 MM, now upped to $ 143 MM. They say consensus EBITDA is $ 122 MM, so CS is above consensus. They estimate EPS at $ 1.31 versus their old estimate of $ 1.07. Consensus is $ 1.16.

    They rate NTI as Outperform which is unchanged from their prior rating.

    They also upped their estimates even more for WNR, NTI's controlling parent company.

    Overall for the sector, with no differentiation for NTI, they don't seem to be in any hurry to buy. They think Q4 will be seasonally slow (as usual), they have concerns about diesel pricing and crack spreads.

    I have a guess for the Q3 distribution but this post is already too long. Later, if anyone cares.


  • Reply to


    by jrad52 Oct 9, 2015 9:35 AM
    jrad52 jrad52 Oct 9, 2015 1:55 PM Flag

    First, I bought some more NEWT this morning. May be a mistake but I'm impressed by the volume and pricing.

    Anyway, a puzzle - when NEWT did the secondary last year, it said the costs of the secondary would amount to $ 1.8 MM (page 215 of the Form 497 filed 11/13/14). Quote - "We will pay all expenses incident to the offering and sale of shares of our common stock by us in this offering. We estimate that the total expenses of the offering, excluding the underwriting discounts and commissions will be approximately $1.8 million". That was only an estimate, and slight differences might well be expected (my comment).

    Then when NEWT filed its 10-K, the numbers had changed a little - "On November 18, 2014 the Company completed an offering of 2,530,000 shares of common stock at a public offering price of $12.50 per share. Total offering costs were approximately $3,700,000." Maybe they explained the doubling of the expenses somewhere but I didn't see it.

    Couple this with the confusion about stock ownership by the insiders and I think NEWT needs to spend a little more on SEC compliance so that outside shareholders might get a clue as to what is going on.

    Now, NEWT projects the costs of the current offering to be 6.4% of the offering price, which I compute to be $ 1.06 per share. We'll see, but we may have to wait for the year-end statement to get the complete picture.

  • jrad52 by jrad52 Oct 9, 2015 9:35 AM Flag

    OK, so I shouldn't have changed my answer - they did price last night. I'm used to overnight MLP offerings (not many this year, though), and they usually result in a 3 or 4% price drop.

    But it helps to remember that NEWT is a micro cap stock and it was growing its shares outstanding by 20%.

    Anyway $ 16.50 is 11.5% lower than the stock closed at 2 days ago, just before they announced the offering. Last year, the offering costs on the secondary amounted to 11.7% of the gross proceeds (astronomical!), and at that rate, the net amount to the company should be less than $ 15 per share. And I thought they weren't going to do secondaries below book value.

    I'd like to hear management's take on this, but right now I'm thinking I made a mistake getting involved with NEWT.

  • Reply to

    Question for ayscuew

    by jrad52 Oct 8, 2015 7:32 PM
    jrad52 jrad52 Oct 9, 2015 8:26 AM Flag

    Unless you were investing your lawn mowing or newspaper route earnings back in 1965, I've finally found someone older than me. I bought my first stocks in 1973, just as the 1973/1974 stock market crash was starting. It taught me a lesson about market timing, but I've had to re-learn that lesson over and over again since then.

  • Reply to

    Opt-out DRIP

    by jrad52 Oct 7, 2015 6:59 PM
    jrad52 jrad52 Oct 9, 2015 8:18 AM Flag

    Actually, that's one of my most basic investing rules - if you find a company that you think is gouging you (that's a lot stronger word then you used, but hopefully you get the idea), buy stock in the company. Most recently, this has worked out great with buying stock in my local cable TV provider.

  • Reply to

    New secondary

    by jrad52 Oct 7, 2015 6:52 PM
    jrad52 jrad52 Oct 8, 2015 7:41 PM Flag

    No, this 2 MM share offering is not the 2 MM (plus/minus) shares being issued for the special dividend. These shares are being issued for cash. The shares that will be issued as part of the special dividend won't return anything to the company.

    As to using the proceeds of the secondary to fund the cash part of the special dividend - last month, NEWT issued $ 8.2 MM of debt (I haven't checked, but the company says they trade OTC under the symbol NEWTZ) and I thought that would be used to fund the cash part of the special dividend. Moeny is fungible so who knows which offering is funding the cash portion of the special?

    BTW, the new debt matures in 7 years and carries a yield of 7.5%. The new shares being issued in this secondary carry a dividend yield of at least 11%. I'm not sure I see the attraction of this equity offering.


  • In an idle moment today, I went back through the NRP message board to try to find your earliest post. Could it be that this coming January will be your 5th anniversary on this board? Or has Yahoo lost some earlier posts?

    And at this point, I'm not sure it matters whether NRP eliminates or continues its distribution. That is, if NRP uses the extra cash to pay down debt. The price can't get much worse. Of course, I've said that before (things can't get much worse) just before we hit the iceberg.

  • Reply to


    by yrrabqx1 Oct 8, 2015 1:42 PM
    jrad52 jrad52 Oct 8, 2015 3:22 PM Flag

    Good question. At first I thought it had happened this morning but since there's been no announcement from the company, I assumed the deal was being priced tonight, based on today's closing price. But now I think the deal won't close for a few days.

    Most of my experience with secondaries is in the MLP space where overnight deals are the norm. NEWT is a tiny company, and they probably have problems selling 2 MM shares.

    Last year, NEWT made the announcement of its secondary on November 3 and they finally announced the pricing on November 13. So probably today is people guessing where the secondary will price.

    Last year, they apparently had to do a road show to get the deal sold. Back then, the pre-secondary shares outstanding was about 8 MM, and they were selling another 25% or so of stock. Today, thesecondary will increase the shares outstanding by 20%. So I guess it will take a few days.


  • Reply to

    New secondary

    by jrad52 Oct 7, 2015 6:52 PM
    jrad52 jrad52 Oct 8, 2015 1:33 PM Flag

    That was the number of shares outstanding yesterday.

    There are 2 parts to yesterday's prospectus - the first part is the Supplement and the 2nd part is the original prospectus. At the front of the overall document, they say the Supplement is the controlling document. The original prospectus is there for background information. But the Supplement, which is for the sale of 2 MM new shares (or 2.15 MM maybe), specifically says the 10.3 MM share number is before the current offering. So my read is that the overall amount of the special dividend will stay the same (about $ 34 MM, the amount of NEWT's tax basis retained earnings before the BDC election), but the per share amount will drop to about $ 2.75. We'll see.

    Last year when they did the secondary, the price dropped (but not as much as today's drop), but it rebounded to a new high a few days later. I think I'm going to watch today and buy some more but it still seems to be dropping so far.