Normally when a company is the center of a potential corporate restructuring, the PPS rises dramatically, but ENBL languishes in the 6.5-8 area regardless of the news flow. The tangible book is north of $14 per share compared to KMI which is close to zero due to all the goodwill and intangibles on their books. I am mystifed at the poor market treatment of ENBL.
I am also beginning to question this investment. The 10% rate that CNP got smacks of self-dealing considering that ENBL is investment grade with a stable outlook per Moody's. Has the majority partner figured out a way to back door excessive returns to them while potentially diluting or cutting distributions in the future? i am not saying that's happening, but worthy of consideration.
Today was even more frustrating. The stock came out of the gates strong up to 8.40 and then fell nearly a dollar from there. I thought the CNP preferred purchase would have been a bigger catalyst especially in a 300 point up market.
Looks like being in the high 6's and selling in the high 7s has been working pretty well here for a few weeks.
Moody's reaffirms ENBL investment grade rating with a stable outlook points to its steady distribution and transmission business as an offset to commodity price exposure which differentiates ENBL from other MLP's.
Sentiment: Strong Buy
Just trying to flush out weak longs to pick up cheap shares, GS cannot be trusted. After it has ran into the 12-14 range, then they'll probably put it on their "conviction buy" list, only to short it back down.
Tangible book value is over $7 billion vs. market cap at current prices of $4 billion. KMI tangible book is about zero due to so much goodwill on the asset side of the balance sheet. ENBL has been trashed because of the low float coupled with KMI fallout and MLPS (MLP bear etf). Bear case now rests with the GS $20 bbl price and that oil stays that low for longer as well as NG prices staying below $2 mcf for several years. Both events are low probability especially on the NG side with LNG exports beginning soon, more coal plant switching and cooler weather headed into the midwest.
I think the prospect of a large distribution cut is more than reflected in the unit price, not to say there could not be a retest of the recent low.. A bullish API oil report after today's close bodes well for early tomorrow. EIA report at 10:30est tomorrow morning will then set the tone for the rest of the day. A short squeeze could put this very low float security over $12 easily in a few hours.
They would need to offer a premium. Not sure this would even be part of a merger scenario, but it makes sense for them to buy it back cheap.
Utilities in general are needing to merge due to lower electricity demand and to meet stricter emissions standards. I agree that an OGE/CNP merger appears seems to make sense. I hope they fold in ENBL by purchasing the 18% in public hands, if the marriage happens.
At this point, best case scenario for ENBL would be for some type of Mideast supply disruption. Shorts mostly thru the bear ETF MLPS have been ravaging this sector indiscriminately.
Connection is stronger to USO than any other symbol that I track. I think the CNP and OGE price action has been due to the position that Elliott took in CNP, plus rumors of a CNP and OGE hookup. However, with ENBL representing one-third of CNP's earnings, it tells me that they're not too worried about ENBL distributions. However, the bear case is that oil and natural gas continue their death spiral with domestic production reduced. ENBL would have to renegotiate contracts with producers in BK and accept lower fee based contracts at renewal. Personally, I didn't realize that Mother Nature was going to cancel winter this year which has killed NG. My thinking was that with the utilities switching over from coal and LNG exports to begin soon that ENBL would be OK since its more gassy than oily. The unexpected exogenous event can kill an investment.
I believe CNP already has to pick up ENBL's assets and iiabilities since its considered a sub due to their greater than 50% interest.
CNP holds 55% of limited shares and OGE has about 27%. ENBL distributions account for about a third of CNP's net. It would not seem to be in either's interest to cut the distribution, but with NG prices at 14 year lows there maybe no choice in 2016. It seems the better route would be for all these entities to combine or buy back the limited shares in public hands and get their future out of the hands of rating agencies in the near term.
Agreed with your thoughts, plus throw in that the two GP's (OGE and CNP) own 85% of the units, so they have no incentive to screw the limited partners. Not much float makes the price action quite volatile.