Not a realistic idea, I guess, but NRP could accelerate its debt paydown by buying back some of its outstanding bonds at a fairly large discount. The last I looked, the 2018 bonds were trading a little above 70. That would also boost EPS a bit, although that doesn't matter much.
Last year was a fluke. NRP did a public offering of 8.5 MM units in October 2014 to finance the oil & gas investment, and as part of the sales pitch, they said insiders were buying some of the offering. If you go back to prior years, you won't see any particular buying history in October.
But for insider ownership, you have to break the insiders into 2 groups - there's Mr. Robertson and his son, who own an absolute ton of units - north of 20 MM, if I recall correctly. Obviously, they have taken the biggest bath of any NRP investors. Then there are the "regular" management people, who tend not to own many units.
Sorry I misunderstood. There was a discussion on this borad a few months ago that the current $ 1.82 dividend would be maintained after the special, and I thought that was the point you were making.
But I agree that the total dividend we will receive after the special should be at least the same as the total dividend we are now getting. Lower rate, more shares, should offset. And I think that with the recent acquisition, some growth in the 2016 overall dividend should be expected.
Easy - with a few caveats, very similar to Q2.
In Q2, NRP earned 25 cents EPS. That included about 8 cents for a noncash gain on a coal reserve swap, so ecluding that, EPS would have been 17 cents. I'm looking for 12 to 20 cents EPS, with the 2 warnings below. EPS is not so important for an MLP, and especially an MLP that is trading way below book like NRP is.
DCF in Q2 was $ 47 MM, including $ 6 MM of nonrecurring items like sales of equipment. So for Q3 I'm looking for about $ 40 MM or so. That would be about 32 cents per share.
Based on where NRP is trading, neither of these numbers matter. People just see the coal exposure and the high debt and keep away. But as a long-shot bet on a recovery, I think it's a reasonable gamble right now.
The 2 caveats are: 1. At any time, NRP could write down or impair its coal reserves of oil & gas operations. I don't see them doing an oil & gas impairment, but I'm surprised they haven't impaired the CAPP coal reserves already. This would be noncash, and since the market isn't giving them any credit for CAPP, it's pretty meaningless except that it would slam the quarter's EPS.
And 2. NRP hasn't owned the VantaCore aggregates business long enough to show any seasonal trends. So I'm assuming Q3 will be similar to Q2, but I really don't have enough history to be comfortable with that.
But things should offset each other, and the Q should be similar to last Q, I think.
I don't read that statement the way you are reading it. I thought it meant that the $ 3,29 special wouldn't count as part of the 2015 $ 1.82 regular dividend.
Please understand that I would love to keep getting the same distribution, so I'm arguing against my own position. I'm just trying to be realistic.
2 points - NEWT can't know today, and certainly didn't know back in August, how many shares it will have to issue in the special. If the stock is at $ 20, it will issue something like 1.3 million shares, an increase of 12.5% from the current 10.3 million outstanding. If the stock is at $ 15, the additional shares will be 1.7 million, or an increase of 16.7%. And if BDC prices tank, and NEWT is trading at $ 12.50, there will be 2.1 million new shares issued, for an increase of 20%. Since they don't know how many shares will be outstanding in 2016, they can't reasonably project the 2016 dividend.
More importantly, Barry did a presentation on Sept 21 and he said the $ 1.82 regular dividend was based on 10.3 million shares outstanding. He talked about the $ 3.29 special, but did not say anything about the regular dividend rate after the special. He didn't repeat the comment he made back on the Q2 call.
He is just as optimistic about the business as always, and maybe he will be more specific on the Q3 call. Maybe he believes the business is growing enough to support the same dividend. I'd love that, but I would be surprised if he says that this early. As the date for the special approaches, I think everyone would like an idea of the regular dividend run rate going forward. So I hope he says something specific.
NEWT has never said what they think the dividend rate will be post the stock dividend. But the number of shares will increase by 10% to 15%, depending on the price on the day of the stock distribution. In order for the dividend rate not to drop, taxable BDC income has to increase by that percentage just to keep the dividend flat.
So in the absence of company guidance, I'll stick to believing the dividend will drop a bit for a while.
NEWT made 2 announcements - the quarterly dividend of 50 cents, which I think is important and the cumulative $ 3.29 dividend to qualify as a BDC, which I think is irrelevant.
The 50 cents puts NEWT on track for the projected $ 1.82 dividend for the year. We can't annualize the 50 cents as a projection for next year because there's going to be a lot more shares outstanding next year. But whatever the 2016 run rate is, I think we'll be looking at about a 10% yield for next year, assuming the share count and the dividend dilution offset each other.
But the $ 3.29 dividend, whether it's paid in stock or cash, is just a 1-time give back of part of the company's assets. The share price should drop on the day it goes ex by about the same amount.
So I'm happy, but I'm not selling. I should have bought more in the last week or 2, but that's another story.
That's one of the things I could never understand about NTI. They have all these cost advantages and they are way more profitable than almost every other independent refinery in the US. But the cost savings on the inpu side don't seem to reach the bottom line they way you would think they should.
So for Q2, the Gulf Coast crack spread was $ 17 per barrel. NTI has 2 significant cost savings on the input side. They source most of their oil from the Bakken with 25% or so from Western Canada Select and a bunch from Canadian synfuels. In Q2, the spread between WCS and WTI averaged over $ 15 per barrel. They keep telling us that there's a transportation savings of $ 15 or so per barrel for oil from the Bakken. I know synfuel is expensive and they are trying to move away from it, but I don't know the cost differential.
With all that, NTI's gross margin per barrel in Q2 was $ 17.85, ignoring the lower-of-cost-or-market inventory adjustment.
With all the input savings, you'd think the margin would be even better, wouldn't you?
I'm not criticizing NTI; I'm just saying I don't understand it. And I've learned not to put too much faith in the supposed input cost savings.
I wish I had read your post before spending 25 minutes listening to the presentation. The 2 specific capital projects he mentioned (upgrading the number 2 crude unit and the desalter projects) have been discussed by the company for about a year. The third project, which is not imminent and involves the ability to shift some asphalt production to gasoline, as you mentioned, is something I don't recall hearing before.
But the presentation covered 3 companies - WNR, WNRL and NTI. So maybe NTI got 5 to 7 minutes total time. And most importantly, he didn't discuss and no one asked about the shut down.
If you're interested, start the presentation around the 14 minute mark. The first 14 minutes are a general introduction to all 3 companies and then discussions of WNR and WNRL. NTI gets more air time after that.
The following does not tell us exactly what NTI is experiencing, but it points to the direction.
The Gulf Coast 3-2-1 crack spread averaged $ 17.22 in Q2. It was over $ 20 in July and August, but it's currently half that amount now. Yesterday it was quoted at $ 11, but it spent a lot of September under $ 10.
The Gulf Coast spread doesn't apply to PADD II where NTI operates, and it doesn't capture asphalt, which NTI produces a lot of. But the direction is bad for refiner profits.
NTI uses CWS for about 25% of its input. The spread between WTI and CWS has been shrinking recently. It's still decent, but it's lower than in Q2 and trending lower. I stopped following it last week when I decided to exit NTI but you can follow it.
In August, NTI said the Bakken-WTI spread was tightening, which is why they were trying to source more Bakken oil in the field and not at the hub.
And MLPs are tanking left and right. Maybe the recent weakness (hopefully) was just managers doing some window dressing for Sept 30. But the ways things stand now, if NTI says anything less than great about Q4 on the earnings call I think the downside risk is high.
Today, WNR (and NTI) are doing a presentation and maybe they'll say something helpful (and hopeful). But a potential $ 7 drop in the crack spread worries me.
Not proud. I dodged a (so far) small loss on NTI, but I still own lots of ETE, EPD and all the other big MLP names. If I had been smart, I would have kept NTI and sold everything else. My loss would have been smaller.
But that's my main concern about NTI - just about all the other MLP names have died and the damage hasn't hit the refiners yet. I don't think the selling is sensible - people just want to get out of MLPs. The refiners have held up this year because the price of gasoline/diesel hasn't fallen as far as the price of oil. But I think that's changing and when people see that, I think the refiners will join the wake.
I am having another problem with Yahoo, so I'm back to really short messages.
OCIR didn't hit a record low - it was under $ 18 shortly after the IPO.
I didn't see the GS report, although I assume it's not positive.
But Einhorn's GreenLight Capital funds have been long CNX for over a year, and have kept buying through June 30, at least (the Sept 30 report isn't due until November, so we don't know what's happened since Q2). Over the last year, CNX is down almost 80%, from $ 42 to below $ 10, and he has suffered that loss on his oldest shares.
But he's stubborn and it's so surprise he bought 28% of CNXC's IPO in July. I don't think he knows anything that everyone else has missed. He's down about 20% of that investment already. His reinsurance company, GLRE, is down 30% YTD, and that's the best publicly available information on his results so far.
So I think he's a lot smarter than I am, and a lot more stubborn. And I don't worry at all that he chose CNXC instead of ARLP.
I'm not leaving the board. You can't get rid of me that easily. I just left this MLP for a while. I still think NTI is the best of the MLP refiners. It's also one of the very few MLPs I own that haven't been a disaster this year. But all the other MLP disasters have me worried.
Sorry, that was a typo that I didn't catch. I am out of NTI for now.
I did not sell because the crude unit being repaired. I just think the crack spread is going in the wrong direction, and with the general weakness (to put it mildly) in the MLP space, I don't want to be around when the earnings call takes place. My sale was really just cutting back on my MLPs.
As to the shutdown/repair, I checked all the earnings releases since the IPO. I found 4 times when they said in the earnings release that there had been an unplanned maintenance shutdown of some sort that they did not issue a press release for. Sometimes, they only mentioned the unplanned shutdown a year after the fact - In the Q1 2015 release, for example, they mentioned that there had been an unplanned shutdown in Q1 2014 that they had never mentioned. So I think it's fair to say that NTI does not do press releases for insignificant maintenance problems.
But when they do make an announcement, it tends to be a big deal. In Q3 2013 they announced a fire at one of the crude units on September 22. They finally announced the re-start a month later, on October 21. They said it only cost $ 3 MM to fix the unit, but they lost a month's worth of production from the unit. NTI did not make any news releases about the status of the unit until it was fixed.
This may not be anything like the 2013 event. But it could be.
Again, that's not why I sold. I sold because I think the crack spread is dropping as summer ends; only this time it's dropping from a really high level and the drop seems to be significant.
My timing on selling MLPs is exemplary - I'm almost always wrong. So I'm not trying to convince anyone to sell.
They didn't set aside $ 50 MM. They said the budget for 2015 for maintenance cap ex was $ 53 MM but they didn't "set aside" any money to fund this. A small part of the $ 53 MM was spent in Q1 - total cap ex, including expansion items, was $ 6 MM. Whatever money they spend on maintenance cap ex this Q to fix whatever the problem is will come out of DCF and the distribution.
They did set aside $ 7.5 MM in Q1 for the planned turnaround. They reduced Q1 DCF by this amount, so there's the "set aside".
Before the announcement, I was expecting the Q3 distribution to be a bit higher than Q2. But with the lower thru-put and my belief that the crack spread was squeezed towards the end of Q3, I don't expect that any longer. I think it will be decent, just not as good as Q2. There's something else going on at NTI that I don't understand. Their original projection for production was 98,000 bpd at the midpoint, and they gave that guidance in early August, so July must have been at that run rate. They only announced the problem on Sept 17 and they said they "will be" taking down the unit, meaning that it had not happened as of Sept 17. But the guidance was dropped to 88,000 bpd at the midpoint. My guess is that the unit was not operating at the level they expected for quite some time before they decided to shut the unit.
Anyway, Q3 is just about over and I think it will be decent and I think people will start focusing on Q4. Q4 is seasonally slow, maybe the crude unit will still be down for part of Q4, and the Gulf Coast crack spread today is just about half of what it was a month or 2 ago. NTI does not use the Gulf Coast spread, so I only mention it as an overall comment on spreads.
Anyway, I am not out of NTI for a while.
BTW, NTI has had several unplanned maintenance slow-downs/shut-downs since the IPO. Some of them were very small, some were big deals. Who knows what this will be? Probably not much, I'm guessing.
Blackhawk says it was the winning bidder for Patriot's assets. From the sound of their statement, it looks like Blackhawk intends to continue mining, which isn't good for prices.
On the pother hand, West Va says the winning bid (which doesn't involve paying any upfront cash, apparently) doesn't adequately cover the mine reclamation costs. I think those costs only come into play when a mine closes; until then, the miner has to post a bond (assuming the buyer isn't financially strong enough to be trusted) to cover the costs. So I'm guessing privately-held Blackhawk's balance sheet isn't that pretty.