Yes, OCIP is an MLP. The IRA tax issue is complicated by the fact that the IRS has never ruled on certain important issues related to sales of interests in MLPs. But there is always a risk that an IRA might be subject to Federal income tax (called the unrelated business income tax) on income or gains resulting from an investment in OCIP. It depends, in part, on how many units the IRA owns, as well as how much taxable income it generates. In all likelihood, there would be no tax exposure for the first few years that an IRA owned OCIP - the company estimates that taxable income thru 2016 will equal less than 30% of the cash distributions. But when you sell, the tax deferrals may well come back to haunt the IRA as UBTI. So I tend not to invest in MLPs in my IRA or Keogh accounts.
Not yet. I almost pulled the trigger a week or 2 ago, but ARLP/AHGP tanked so I bought them instead. Another coal MLP, but this one extremely profitable with a great coverage ratio. If coal weren't so ugly, I'd buy a whole lot more of it; they have 2 mines coming on stream in the next year and a half, 1 of which is pretty much guaranteed to produce great cash flow. But they don't say much about their contract positions so I can't go crazy over them.
And I have way too much invested right now in all sorts of MLPs. I'm way over my target allocation to MLPs. So I need to sell something before I can let myself buy another MLP, including NRP.
But thanks for asking.
I don't think I'm the moderator, but maybe I can explain a few things. OCIP does not sell fertilizer. It does, however, make ammonia (1 of its 2 products), and ammonia is used to make fertilizer. So OCIP sells its ammonia production to 2 companies, 1 of which is RNF, a publicly-traded MLP that makes fertilizer.
OCIP owns 100% of an existing methanol/ammonia plant, not a minority interest in a plant that is being built. Here's the confusion - OCI is the parent company of OCIP; it owns about 80%. OCI is a major European chemical company that makes nitrogen-based fertilizer, and also owns a construction company that builds chemical plants. Because the names are so similar, it gets confusing. OCI (the parent) is building the new methanol plant that you see in Yahoo's headlines; OCIP does not appear to be involved in that construction, at least not yet.
Methanol/ammonia production uses natural gas as a feedstock. When nat gas prices spiked in the 2000s, companies shut down their methanol plants. When nat gas priced dropped due to shale, people started to re-open those closed plants and build new ones. In OCIP's prospectus, they said something like this - total US methanol production is around 1 million tons; it is expected to grow to 6 million tons over the next few years because of low nat gas prices. So OCIP purchased a methanol plant that had been closed since 2004, and re-opened and expanded it. Lots of other companies made similar announcements; Celanese might have been 1. But OCIP's plant is currently in operation.
Hope this helps.
Oops, you violated the first rule about predictions. If you predict an event, don't give a specific time frame. Unless the market craters before year end, I can't see any reason for a big down movement for NRP this month. Unless the EIA 2014 energy report, which I think si due out on December 16, is really bad for coal, which I don't expect.
You got it. OCIP will distribute 100% of available cash each Q, whatever that amounts to.
And natural gas makes up 75% of OCIP's variable cash expenses for production. And it only has 2 products, methanol (75%) and ammonia (25%). These are generic chemicals, not proprietary or specialty. So customers can buy the exact same chemicals from other suppliers. Sales depend on lowest price and availability. Which means lowest price wins.
Sounds just like PDH, on the downside. It also sounds just like TNH, which until recently has been a great investment.
There is confusing disclosure in the prospectus about all of this. First, the prices of methanol and ammonia do not exactly track the price of natural gas, because natural gas has many other uses. So, natural gas prices could rise, as they have recently, without methanol and ammonia prices rising similarly. I'm sure you could track the price of methanol, but I have no idea where. And ammonia prices have been falling in recent quarters because of weakness in the agricultural area. I think OCIP sells substantially all of its ammonia production to RNF, a fertilizer MLP whose price recently has been fertilizer. Anyway, OCIP says a $ 1 change in the price of natural gas would change its profit by $ 32 MM, or 40 cents/unit. That sounds really low. My thought is that a $ 1 rise in natural gas prices is about a 25% - 33% rise. If natural gas makes up 75% of variable cash costs, I would have thought the impact would be much greater. But that's what they said.
So yeah, variable distribution MLP whose profit depends on the relationship of natural gas prices to methanol/ammonia prices.
My answer is too late, but to be fair - cash flow from ops for the 9 month period was $ 254 million, but DCF was only $ 73 million. You're right about Q3, but to be fair, the YTD numbers are important too. GLP is consistent in the way it reports DCF, no matter the relation to op cash flow. DCF ignores working capital changes.
The reason for the difference is that operating cash flow has been inflated YTD by the drop in oil prices, which decreased inventories by $ 232 million YTD. This benefits op cash flow, but is ignored in DCF.
And unless I'm missing something, debt is only up $ 37 million YTD. Not bad, when you consider that GLP made $ 185 million of acquisitions so far this year. Again, the drop in oil prices is helping. If prices had been stable, your concerns would have been right.
No one bought any shares. The officers were given restricted shares back in Dec 2010 at no cost, and this week the shares vested, so they got the shares free and clear. That's why they had to file the forms 4. Plus they received in cash the cumulative dividends the restricted shares would have received over the last 3 years.
So no actual cash outlay except for the withholding tax that should be due. Unless they made Section 83(b) elections back in 2010. So you should expect to see the officers/directors sell a few shares to pay taxes.
If companies would give me shares at no cost, I'd take them too. It wouldn't be a bullish sign, though. It's also not bearish, just a nothing.
FWIW. CS maintained its Outperform rating on KMP and KMI, but it dropped its target prices. The 12 month target for KMP is now $ 90, down from $ 97, and KMI’s target price is $ 40, down from $ 45. CS drops its longer term growth rate for KMP from 7% to 2.5% based on the updated distribution guidance. I understand the drop in growth and price projections – KMP is always on the edge of covering its distribution, so any slowdown in growth hits the distribution and the price quickly. I don’t understand their keeping the Outperform rating, though. Since CS is probably no different from the other analysts, I would expect trading today to be ugly.
First thing I checked. UAN's facility in Coffeyville, KS is 650 miles from RNF's East Dubuque facility. TNH's is about the same. Because shipping costs are so high, I didn't think RNF's problem would help either UNA or TNH. So I didn't add to my UAN. Unfortunately, I didn't sell any of the UAN I already own.
This message has been delayed due to my not being able to access Yahoo's boards for about an hour. But I still think it works.
GES reports tomorrow, so option volatility is reasonably high. This morning I was able to buy GES in the very high $ 33s and sell December $ 33 option for $ 2 before commissions. The stock goes ex before the option expires, so I should get another 20 cents on the trade. So unless the earnings really stink, I should be able to make a little less than 4% on my money in about 2 1/2 weeks.
I could have accepted a slightly lower return with more security if I had sold the $ 32 call, but the bid/ask spread on that option was pretty wide.
My risk is that earnings really stink, but no one is expecting much, and last Q was pretty good, compared to expectations. Also, there is a very remote possibility of a special dividend. GES paid 1 last year (because of the anticipated tax rate change in 2013) and also in December 2010. I figure that's about a less than 1% chance, And I'm protected down to a price of $ 32 or so.
Nothing special, but in today's rate environment, I think I can pick up a few bucks with some idle money with an acceptable risk level.
Actually, the release said the underwriters had exercised their overallotment option, and the total shares sold was 5,175,000. I assume the overallotment sale happened a day or 2 after the first sale; maybe today is a distribution day? Or maybe today is just another bad day for yield securities.
You’re missing half the story. As far as I can tell, the CEO has never purchased a single unit of APL on the open market. Every one of the units he has owned were given to him as restricted units, where he paid zero and the units vested over several years, or else were the result of exercising employee stock options. He has always sold most of the units soon after vesting/exercising.
Over the past 5 years he has received hundreds of thousands of units, either at no cost, or else at an option price. When your cost is as low as his is, you don’t care so much about whether you get the top price when you sell. The company just refills his restricted shares after he sells.
So I don't think his sale plan means much. It's just a part of his regular compensation. Which was $ 4 million in 2010, $ 9 million in 2011, and $ 6 million in 2012. Those numbers actually understate the value of his options, but that's pretty standard.
The crack spread is for the Gulf Coast prices. Take the price of Gulf Coast gasoline ($ 2.56/gallon) times 84 (that's 2 barrels). That gives you $ 215.04 for the 2 barrels of gasoline produced. Then multiply the price of Gulf Coast diesel ($ 2.97/gallon) times 42 (that's the 1 barrel of diesel produced) which equals $ 124.74. So the total value produced from 3 barrels of crude is $ 339.78.
Then subtract the cost of 3 barrels of LLS ($ 96.66 X 3 equals $ 289.98). That's your cost of producing the 2 barrels of gas and 1 barrel of diesel. So the profit on converting 3 barrels of LLS into 2 barrels of gasoline and 1 barrel of diesel is $ 49.80 ($ 339.78 less $ 289.98). Since this is the profit on 3 barrels, divide by 3 to get the profit on 1 barrel. $ 49.80 divided by 3 equals $ 16.60. Or the $ 16.53 they listed.
Hope this helps and hope you had a good Thanksgiving.
All the NY teams are really bad this year. The Knicks/Rangers/Islanders/Jets/Giants probably have a combined record of 10 wins and a million losses. I'm just looking forward to spring training.
Your tax basis is equal to the amount you paid ($19, I guess), minus the cash distributions you received, AND plus/minus any income or loss that was shown on your K-1 each year.
All MLPs will track these numbers for you. In the year you sell, there will be an attachment to your K-1 that shows the cumulative adjustments to your basis. They are generally pretty good at this, but check the calculation anyway.
That K-1 schedule will also tell you how much of your gain is ordinary, and how much is capital. The general rule of thumb is that any proceeds in excess of your original cost (not your tax basis) should be capital gains. Any other gain will be ordinary, shown on Form 4797.
The reason there's ordinary income is this: your share of CLMT's taxable income each year was reduced by tax depreciation deductions that CLMT is allowed to claim and allocate to you, based on the amount that you paid for your units. When you sell, you are required to "recapture" all those deductions as ordinary gain, and as I said, CLMT will report that amount to you. They report the ordinary gain amount to the IRS as well, but as far as I can tell, the IRS has not been able to track this through to you, so far.
You didn't ask, but there's more. You may have a passive loss carryover if the K-1s you received each year showed a net loss. That loss carryover can be used to offset the ordinary gain. CLMT is 1 of the very few K-1s I get that has shown a profit in some years, so I can't be certain if you have a loss carryover. If you use Turbo Tax or something similar to prepare your return, it should have told you the amount of your carryover when you did the 2012 tax return.
That's the problem with MLPs- the tax deferral is great, but when you sell, the deferral comes back as ordinary income, all bunched in 1 year, so it may move you into a higher tax bracket.
Hope this helps. And ignore the guy that's telling you that distributions are taxable in the year they are received.
Well, let's see. Three of the seven board members are named Leeds. Those 3 comprise the 3 top managers of the company - including the CEO and Chief Exec of North American Tech Products and Vice Chairman. Their salaries are about 75% of the named current execs listed in the proxy. And, of yeah, they own 70% of the company's stock. So you want the 3 board members to vote to replace themselves as management? If they did that, I suspect the 3, as the controlling shareholders, would vote to replace themselves as board members. They'd probably replace themselves with new board members that would re-hire themselves as management.
Confusing. But management isn't going anywhere, and the board isn't firing them. And the shareholders aren't voting to replace the board any time soon.
But you certainly have a good idea.
The last post on Bronte's blog that I recall was from March, 8 months ago. They were complaining that their short position hadn't worked out too well to that point, and since ARLP is up about 13% - 15% since then, plus the distributions, their short hasn't worked any better recently.
They could always be right, but their analysis at that time was incorrect. They started by saying that ARLP's average price in the IB was way higher than ACI's in the same area. But ACI only had 1 mine, so it wasn't a reasonable comparison. With 1 mine, you could have issues about energy content and long-term contracts that aren't comparable. ACI had purchased the mine as part of its ICG acquisition, and ICG had warned in its SEC filings that it had some undermarket long-term sales contracts where the re-pricing mechanisms didn't fix the problem. They didn't say that their IB mine had these contracts, but no outsider can know which mines had the problem. So it was not a reasonable comparison, especially when there were other IB miners with much higher average prices per ton, very similar to ARLP. It seemed like the author had cherry picked data for his argument.
Then he compared ARLP's average pricing, which is the result of long-term contracts, to the spot prices for a different grade of IB coal. Again, not a reasonable comparison. Every publicly-traded thermal coal miner that I have seen works off long-term contracts. I have no idea how large the spot market is (problem # 1 for comparability), but it only reflects prices as of a specific date, not over a period of years (problem # 2).
Finally he had some analysis of ARLP's future contract tonnage, claiming that it showed that new contracts were being priced below the ones they were replacing. But his analysis was suspect; he took what were probably push-outs of deliveries and said they were new contracts. He had no basis for this conclusion.
Anyway, he's been wrong so far. And I think, wrong, period.
Dominion Virginia got permission a few months back to build a new natural-gas fired power plant to replace 2 coal-fired plants that are closing in 2015. Pretty big plant, 1,358 megawatts, so presumably the plants being closed are fairly large.
There was a controversy about building the new plant – people said the demand for electricity in VA wouldn’t be anywhere near Dominion’s projections, so they didn’t need any new plant, no matter how it was fired. They wanted Dominion to buy electricity on the open market, saying that would be cheaper than the new plant. No controversy, however, on getting away from coal.
None of NRP’s major lessees supply Dominion, so the pain is only indirect.