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Calumet Specialty Products Partners LP Message Board

jrad52 141 posts  |  Last Activity: 4 hours ago Member since: Jul 25, 1999
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  • Reply to

    What Gives?

    by rfredrickson40 9 hours ago

    Look for the MLP board. If you aren't a member, go to Boards, then look under Community Boards. The MLP board is usually the first or second one listed. And the post has a lot of comments/responses, so you'll have to go back to earlier today - the topic is called something like TEP Secondary coming?

  • Reply to

    What Gives?

    by rfredrickson40 9 hours ago

    Please note that I copied the Hedgeye story from someone on Investor Village. If I'm going to plagiarize something, I should give credit.

  • Reply to

    What Gives?

    by rfredrickson40 9 hours ago

    Hedgeye published a note on TEP/TEGP. That's why it tanked.

    Tallgrass Energy is a ridiculous case of “MLP Math” gone wild.

    Seduced by rapid, near-term distribution growth, investors have bid the LP, TEP, and the GP, TEGP, up to a combined market cap of $6.8B, wildly above the equity value of the assets, which we estimate to be ~$1.0B. Combined, TEP and TEGP have 80 - 90% downside to our fair value estimate.

    We expect TEP to cut its distribution in late 2019 or early 2020 – to zero or near zero – when above-market contracts on its Pony Express Pipeline (Pony) and Rockies Express Pipeline (REX) expire. Even when paying no distributions, we forecast TEP to be over 7x levered in 2020 when EBITDA falls off a cliff.

    The recent rise in TEP and TEGP unit prices makes for a compelling entry point on the short side; consider the following: in the last month alone, TEP and TEGP’s market values have increased by ~$850MM and ~$1.1B, respectively, since announcing that TEP would buy 25% of REX from SRE on April 28th for $440MM cash, which TEP financed with a private placement of 2.4MM new units and RCF debt. PSX had a right of first refusal on this deal and declined to participate. The only other significant change to Tallgrass’ businesses over this time was the restructuring of REX’s contract with ECA, which was NPV neutral, as disclosed in the May 2nd FERC filing. Incredibly, the combined market value of TEP and TEGP has increased by more than $1.9B despite the Company creating no value whatsoever. All that has occurred is a value transfer from TEP to TEGP, as the new 2.4MM TEP units and the $0.09/unit increase in TEP’s quarterly distribution results in an incremental ~$30MM of annual IDR fees to TEGP.

    Investors would be wise to do a bit more due diligence on TEP and TEGP other than just look at the current distribution yield and guided distribution growth. We have done that work. We know the contracts, shippers, competitors, partners, market dynamics, and market rates for all of Tallgrass’ core assets. In fact, we’ve had several, extensive conversations with Tallgrass’ own customers, and they tell a very different story than the Tallgrass management team does.

    Tallgrass is a disaster waiting to happen, and the downside is massive. We recommend shorts in both TEP and TEGP.

    We will publish a full report on Thursday morning, May 26th, and hold a conference call to discuss the key points of the thesis on Thursday at 10am EST. All Hedgeye Energy subscribers will receive the report and conference call dial-in info on Thursday morning before the market open.

  • Reply to

    BIG Tariffs on Chinese steel

    by infinitidrivr May 19, 2016 1:27 PM
    jrad52 jrad52 May 20, 2016 12:43 PM Flag

    Back in March, the Dept of Commerce proposed 266% tariffs on Chinese cold-rolled steel, but the exact tariff wouldn't be set until this summer.

    Reuters and CNN announced 2 days ago that the Dept of Commerce was proposing to raise the tariffs to 500%. I don't see that the WS Journal or NY Times reported this so I'm not sure of Reuters/CNN's source for the story.

    Apparently the issue is China's continuing to rebate money to Chinese steel companies for exports.

    China has protested the proposal and I don't know where it goes from here.

  • Reply to

    Spectrum auction

    by jrad52 Apr 30, 2016 8:03 AM
    jrad52 jrad52 May 16, 2016 1:17 PM Flag

    Actually there was 1 comment I found in the annual report. In the "Risk Factors" section, one of the risks was listed as "the effects of the Federal Communications Commission’s (FCC’s) National Broadband Plan and incentive auction and the potential repacking of our broadcasting spectrum within a limited time frame;"

    Not much use but they did mention the auction.

    I am surprised that they didn't say anything else, at least in the liquidity section. I know the FCC has imposed a gag rule so they can't say much. But as a public company, SBGI has a duty to talk about things that could materially impact the business. And SBGI's management on one of the 2015 earnings calls talked quite a bit about the possible benefits of participating in the auction. So it could be significant and they should have said something, even if only to say "The FCC won't let us talk about the auction." Saying nothing at all is misleading, unless SBGI decided not to participate in any significant way.

  • Reply to

    FELP reports

    by jrad52 May 10, 2016 7:57 PM
    jrad52 jrad52 May 12, 2016 6:56 PM Flag

    You're right about this item being small. NRP's exposure to FELP is mostly collecting the minimum royalties. If FELP can get Hillsboro running again, and get current with the minimums, no one would even notice the effect of the sale/leaseback of equipment. I had just forgotten that NRP had other business with FELP.

    The Sugar Camp mine, which has most of the equipment under lease, is FELP's largest and even in bankruptcy someone will take over the lease. Unlike the reserves, the new miner might have some leverage to renegotiate the deal, but I don't think the exposure is all that much. It's different for the Hillsboro and Macoupin mines which are really down o production.

  • Reply to

    FELP reports

    by jrad52 May 10, 2016 7:57 PM
    jrad52 jrad52 May 12, 2016 11:20 AM Flag

    It gets more confusing. FELP also disclosed sale/leaseback transactions with NRP at its Macoupin mine and I didn't see that in the NRP disclosure. I'm at work right now so this will have to wait, but the full amount really is around $ 100 million, ignoring the big reserves sale/leaseback at Hillsboro.

    That's one of the problems with NRP - they don't disclose much. So when FELP went public, they disclosed far more information about the FELP/NRP transactions that NRP ever did, and FELP still does. Same thing with CINR and Ciner Wyoming. CINR told us much more about the debt-financed distribution that NRP received in 2014 than NRP did. So sometimes I'm looking at information from other sources and trying to tie it into NRP's disclosures.

    But jrummell, you're right. I should have tried to tie in the different disclosures before posting. But I also thought that's part of what happens on the board - someone posts something and maybe someone else corrects them. I often post mistakes but it's certainly not intentional.


  • Reply to

    FELP reports

    by jrad52 May 10, 2016 7:57 PM
    jrad52 jrad52 May 12, 2016 10:49 AM Flag

    You’re right.

    From the 10-K:

    The Partnership owns and leases rail load out and associated facilities to Foresight Energy at Foresight Energy's Sugar Camp mine. The lease agreement is accounted for as a direct financing lease. Total projected remaining payments under the lease at December 31, 2015 were $81.2 million with unearned income of $35.4 million, and the net amount receivable was $45.9 million, of which $2.0 million is included in Accounts receivable—affiliates while the remaining is included in Long-term contracts receivable—affiliate on the accompanying Consolidated Balance Sheets.

    The Partnership holds a contractual overriding royalty interest from a subsidiary of Foresight Energy that provides for payments based upon production from specific tons at Foresight Energy's Sugar Camp operations. This overriding royalty was accounted for as a financing arrangement and is reflected as an affiliate receivable. The net amount receivable under the agreement as of December 31, 2015 was $4.9 million, of which $1.5 million is included in Accounts receivable—affiliates while the remaining is included in Long-term contracts receivable—affiliate.

    So the total amounts to be received from the Sugar Camp sale/leasebacks is $ 86 million, including the expected future profit of $ 35 million. I said $ 100 million, which isn’t far off the total disclosed amount; that is the amount disclosed by FELP. But I was wrong in that the GAAP carrying value is only $ 51 million. So that is the GAAP exposure is $ 51 MM, while the economic exposure is $ 86 million.

    The issue with the equipment sale/leaseback ($ 81 million gross, $ 46 million on the balance sheet) is that if FELP goes bankrupt, NRP will get back used equipment, which in today’s market is basically worthless. The coal reserve sale/leaseback, OTOH, would result in NRP getting back title to the reserves, which would be needed by any future operator.

  • Reply to

    FELP reports

    by jrad52 May 10, 2016 7:57 PM
    jrad52 jrad52 May 11, 2016 6:15 PM Flag

    It means that NRP has not written the receivables off so they are still being carried on NRP's balance sheet at full cost. Which means that if FELP goes bankrupt, as I think likely, NRP has more money at risk than I thought.

    Most of the money owed by FELP to NRP involves the sale/leaseback of reserves. For example, FELP (before it went public) sold the Hillsboro reserves to NRP for $ 255 million and agreed to lease them back for minimum royalties of $ 30 million per year for about 20 years. At the minimum, NRP stood to make something in excess of 10% per year on the deal. Now the Hillsboro mine is closed and NRP isn't getting anything. But in 2015, NRP set up a reserve (that is, it recorded an expense and reduced the value of the related asset on the balance sheet) for $ 300 million. NRP has not said which coal reserves were included in that write-off so Hillsboro may or may not have been included. But NRP has not recorded any reserves for the $ 100 million in receivables that I was talking about.

    It's like the old (and weak) banker joke - if a bank lends $ 100 to someone, the borrower will worry about paying the bank back. OTOH, if the bank lends $ 1 million to someone, the bank will worry about getting paid back. I didn't realize NRP was quite so involved with FELP. I knew FELP was big, just not that it was quite that big a deal.

  • jrad52 by jrad52 May 10, 2016 7:57 PM Flag

    Not surprisingly, a real disaster. The entire Deer Run/Hillsboro Mine was sealed temporarily in April to cut off oxygen in a further attempt to put out the fire. They don't know when the mine will reopen. In the meantime, they aren't paying minimum royalties to NRP.

    Coal production was down 27% from Q1 2015, and they didn't even mention the Deer Run mine closure as one of the reasons for the lower production. They blame "weak market conditions influenced by the mild weather, oversupply in the market and continued lower natural gas prices". I would have thought the mine closing was at least part of the reason, but I guess they may not have been able to sell any of the mine's production anyway.

    They have multiple events of default on their debt and are trying to work out some deal with the lenders. No success so far.

    I didn't realize it, but NRP has about $ 100 million of receivables, mostly long-term, from FELP for various sale/leaseback transactions. Those amounts have not been reserved by NRP yet. If I read the FELP 10-Q and 10-K correctly, there's more owed by FELP to NRP for coal reserve sale leasebacks as well.

  • jrad52 by jrad52 May 10, 2016 10:06 AM Flag

    BSTC reports its income from ENDP sales of XIAFLEX on a 1-quarter lag. This is the first time that ENDP's vials sold dropped, and that will show up in BSTC's Q2 numbers.

    In ENDP's March quarter, vials sold were 14,000, compared to 16,000 in ENDP's December quarter. BSTC's revenue in Q1 based on the 16,000 vials was $ 6.555 million. So I would assume a 10% drop in royalties is coming up next Q?

    I didn't listen to the earnings call. I'll look over the transcript and see what they said.

    In the big picture, the real value of XIAFLEX seems to be the potential new applications, if everything goes well over the next few years. But it is disappointing to see a drop in the PD vials, since ENDP seems to be placing a lot of importance on that.

  • Reply to

    Q1 results

    by jrad52 May 6, 2016 3:26 PM
    jrad52 jrad52 May 9, 2016 2:02 PM Flag

    I understand the sentiment but I think it depends on the price they might get.

    People on this board didn't agree with me when I suggested NRP should sell some of its interest in Ciner Wyoming because they didn't want to sell the crown jewel, and no one wants to sell the oil & gas properties because prices are too low. But NRP has to sell something, and if the oil properties can bring a halfway decent price, I think they should be sold. Either sell Ciner at the top, or sell oil properties at the bottom.

    In Q1, the operational DCF from oil was $ 600K. And the interest expense related to those properties was at least $ 2.5 MM. And the distribution on the units that were sold to fund the purchase price cost NRP another $ 440K. So on an annualized basis, the remaining oil properties will cost NRP $ 10 MM cash flow this year. Not only won't they help pay down debt, they will prevent some debt repayment.

    Which leads me to my point - things are worse at NRP than I realized. And I thought things were bad. In Q1, they could only repay something like $ 10 MM in debt from operations. All the other debt repayments came from asset sales. At this rate, they are OK for 2016, but will they be able to roll the 2017 maturities? And can they repay the $ 500 million of principal that comes due in 2018? Delaying things while we hope for a coal rebound isn't much of a plan. They need to sell what they can, and hold onto Ciner as long as they can. Personally, I think Ciner will be sold at some point; it's the only asset that might raise enough cash to make the lenders comfortable with extending.


  • Reply to

    Journal Cost Basis

    by jchia1236 Apr 26, 2016 10:37 AM
    jrad52 jrad52 May 6, 2016 4:24 PM Flag

    Go to SSP's web site and on the Investors Tab you can access 4 IRS Forms 8937 that discuss the effect of the merger between Journal and Scripps, the $ 60 MM dividend and the receipt of JMG and SSP stock.

    I don't know if you were historically an SSP shareholder than received JMG shares or if you were an historic Journal shareholder. If you owned SSP before the deal closed, look at the 4th Form 8937 on the web site, especially the example attached to it.

  • Reply to

    Q1 results

    by jrad52 May 6, 2016 3:26 PM
    jrad52 jrad52 May 6, 2016 3:58 PM Flag

    Last year, NRP filed suit against FELP for not paying minimum royalties on the Deer Run mine. Through March 31 2016, this has cost NRP $ 23.6 million. Comparing this to the disclosure in NRP's 10-K, FELP owed NRP $ 7.5 million for Q1 minimum royalty and paid $ 100,000.

    Now it seems that FELP is also shorting NRP on other payments as well. On April 1, 2016 NRP filed another lawsuit against FELP for failing to pay $ 4.7 million in various payments at the Macoupin mine. This was not disclosed in the 10-K so I guess most of this amount accrued in Q1.

  • jrad52 by jrad52 May 6, 2016 3:26 PM Flag

    1 complaint and 1 comment. And of course more comments in posts to come.

    The complaint - in the earnings release, NRP has a section titled "Business Results and Outlook". In all of the rest of the release, I found 2 sentences that might be called "Outlook" - under coal, where the release says "First quarter coal production in the United States was down 32% as compared to the first quarter of 2015, and NRP expects that coal producers will continue to cut production and idle additional mines in response to market conditions. In spite of this supply reduction, decreased demand for both thermal and metallurgical coal continues to out-pace supply cuts, and utility stockpiles remain at peak levels." That's it; nothing under soda ash or VantaCore or oil & gas (oil & gas is understandable since they intend to sell the investment). So other than saying coal still has problems, they give us nothing about how they think the rest of the year will go. No range of possibilities, nothing. I find that really upsetting.

    Which leads to the comment. In Q1, they sold assets for $ 42 million (the headline says $ 47.5 million, but the statement of cash flows says $ 42 million; I guess selling expenses ate up the difference). They used this $ 42 million to repay debt. Other than that, they were only able to repay $ 9 million of debt from operations. And half of that $ 9 million came from reducing maintenance capital expenditures. I don't know how much NRP hopes to get for selling its oil & gas interests, but it had better be big.

  • CF is TNH's controlling owner. Credit Suisse had a report out on CF yesterday and with regard to nitrogen markets (which is all TNH is involved in), CS said: "In our view, global nitrogen markets will remain volatile, particularly in 2H16, but note that (i) this has been well expected by investors and (ii) product prices are at or near their respective marginal cost of production (limiting downside in intermediate term; this is in contrast to P&K). Despite near term noise, we continue to believe that more upside exists than downside, especially given incredibly low expectations for global nitrogen markets."

    Not the most ringing of endorsements, but CS has an Outperform rating on CF.

  • Reply to

    NRP reports

    by jrad52 May 6, 2016 8:57 AM
    jrad52 jrad52 May 6, 2016 1:11 PM Flag

    Sure. They have $ 425 million of publicly-traded debt that is trading at a discount and if they buy any of that back, it could result in CODI. Most of their debt is bank debt, though, and I can't see the lenders accepting any haircuts yet. So there's some risk, but probably not a lot.

  • Reply to

    What happened - 18%?

    by bbkb8311 May 5, 2016 3:06 PM
    jrad52 jrad52 May 6, 2016 9:02 AM Flag

    First, I know how you feel. I own another MLP that reported disappointing earnings last night and I'm expecting a drop similar to TNH today. Hopefully I'm wrong, but probably not.

    And you're still ahead of me. I bought and then sold in the $ 105 - $ 110 area so I missed the entire run up to $ 125. Sure I missed yesterday's drop, but I could have done better.

    And finally, depending on what happens today, this might be a decent time to get back in. Nitrogen fertilizer prices are still weak, and more supply is coming to market, but I think TNH should do OK. mI'd love to get your $ 95 entry point but I don't see that happening.

3.500.00(0.00%)May 24 4:00 PMEDT