However the 2% is versus the whole of 2013. If you examine it, it implies the current distribution will not be increased through Q4 2014 (0.65 * 4 = $2.60). Zero distribution growth means the price has to come down further, imo.
CHKR is probably sell selling their gas for not much more than $2. And on top of your points, the rise in NG is just the usual seasonal variation. It typically spikes a little at the start of cold winter weather but by spring (or well before) it will be back down again. No doubt it can get in the $4-$4.50 range on some cold weather by in a few months it will be below $4 again. Maybe results in a few pennies more for one distribution but hardly changes anything in the big picture.
You are wrong as usual. This is one of the fastest growing MLPs.
I purchased my stake back when it came out at $22. Including distributions I am almost a triple on my original investment. That is what you have been missing with your continued negativity against the best performing asset class in the entire market over the last 15-20 years.
It will be 700k b/d more coming out of Cushing. The last couple of months of Cushing growing again will reverse starting January. By definition that will support WTI prices since WTI is priced at Cushing.
Yes, it may result in a bottleneck in the Gulf region, so will be interesting to see if this forces down LLS prices.
And yes, we knew it was coming. I have mentioned several times that Keystone South would start operating in 2014. But until there was a firm date, the market doesn't tend to price it in.
NG prices may go above $4 (probably not about $4.50) during winter as that is the usual seasonal pattern. But come spring (or before then), it will likely be back below $4 due to the continued record setting production levels. Unless you are doing short term trades for the start of winter effect, all the talk of cold weather is not very meaningful. A month or two of $4+ prices and then back below $4 again. Likely that pattern may continue for quite a few years (until there are meaningful export volumes).
Well you have admitted that you have been trading for 30 years with pretty mediocre results. But just because you are not good at it doesn't mean others aren't better.
"The MLP structure requires them to pass on a high percentage of the profits."
No, it doesn't. Commonly repeated but still false. That refers to REITs. MLPs don't have to pay out anything.
Already out of date. It's back below $15 and narrowing rapidly on the news of the Southern leg of Keystone going into operation on Jan 3rd. That pipeline will move 700,000 brl per day out of Cushing and will result in higher WTI (priced at Cushing) prices. This is bearish news for refiners, some more than others depending on geography, as the recently widening spreads have now changed directions.
Wrong. It is counted as cash flow. The profit comes later next time the puts are rolled. You still don't get the difference.
Think about someone who owns a business, say a convenience store. You think every day they are obsessing themselves with how much the business would bring if they put it on the market at that moment? No, they are concerned with cash flow - how much cash the business is bringing in per day/month/year. My focus is with cash flow, your focus is with current valuation.
which crude are you talking about? WTI? Brent? WTS? WCS? LLS? Edmonton Par? etc Several of those indices are outside the 90 to 100 range right now (below and above).
Northern leg of keystone is waiting for approval for cross border (Canada to US).
Southern leg of keystone does not cross an international border and so does not require executive approval. Southern leg goes into service on Jan 3rd and will take 700,000 barrels per day from Cushing to Gulf Coast. Cushing (WTI) price should increase as a result, however it may result in a bottleneck at the Gulf Coast with negative impact on LLS (louisiana Light Sweet).
But it's still not the crack spread so not what he asked for. Your spread is the difference between 2 different crude oil indexes. What he asked for and what is more directly relevant is the crack spread between the oil input costs and the prices for the resultant refined products.
He asked for the crack spread. What you suggested is the Brent-WTI spread. Not the same thing at all, although they may move in the same direction.
guidance for 2014 is $2.60.
Since current distribution is 65c and we assume they won't drop the distribution, that means the 2014 distributions must be 65c each quarter.
Thus Q4 2014 distribution will be unchanged from Q3 2013. Minimum of 5 quarters of zero distribution increase. In that case, this has further to fall.
Perhaps you hadn't noticed but the news of the imminent (Jan 3rd) startup of the Southern leg of Keystone (which will reduce inventories at Cushing) is already reversing the recent widening of the Brent-WTI spread. So the period of higher refiner margins might be very short lived.
A more apples to apples comparison is Edmonton Par Sweet Light. VCS is not comparable to WTI as it is comparing heavy oil to light sweet.
Here are average monthly prices for Edmonton Par Light Sweet.
Yes, there is a significant discount to world (Brent) prices, although nowhere near as big as you imply. The reason for the discount is lack of pipeline infrastructure to get the oil to markets. With Keystone seemingly on hold forever and Enbridge's Northern Gateway also bogged down, there is also a proposal by Kinder Morgan to double up an existing NG pipeline with an oil pipeline on the same route. Canada is losing significant money by selling their oil at a large discount to world prices. If they can't get a pipeline to the gulf coast then they really need pipeline capacity to their own east or west coats - west coast for exports, east coast to displace imports. Canada produces oil to be more than self sufficient but due to lack of infrastructure and over-reliance on the US they have to sell their oil at a discount while importing to the east coast at world prices.
goes into service Jan 3rd. This pipeline will transport crude from Cushing to the Gulf Coast. That should result in narrowing of the WTI-Brent spread as supplies fall at Cushing. The spread is already narrowing since yesterday when the Jan 3rd date was announced. This is bearish for refiner margins. The spread which blew out again over the last few months will now be narrowing, perhaps down to mid single digits range.
guidance for slowing distribution growth.
don't you pay attention to the companies you own? If you read the press releases or check the company headlines, you wouldn't be surprised by this.
At EPB the slowdown in growth is worse. After it came under control of the Kinder group, the ramped up distributions fast by reducing the distribution coverage. Where EPB used to have high coverage (I think 1.3 to 1.5), immediately after being bought by KM, the coverage was reduced to 1.1 or less. That resulted in a spurt in distribuytion growth, however not in dcf. Of course, that is a card which can only be played once. Now that coverage for all the Kinder companies is tight, distributions will only increase corresponding to growth in dcf. Thus slowing growth at EPB. EPB also faces shrinking supply of future dropdowns from KMI. Similar situation for KMP so they are buying distribution growth (CPNO, etc).
As for KMI, the guidance os for 7.5% distribution growth. That would be OK for the LP, but it's on the low side for a GP with IDRs and so the unit price has to be adjusted to correspond to lower expected distribution growth rate.
I think it's pretty clear...after EPB got bought out by the Kinder group, there was a huge ramp up in distributions accomplished by reducing distribution coverage. When under EP control, EPB maintained a good distribution coverage of (forget exactly but probably in the 1.3 to 1.5 range). Once under Kinder control, they brought the coverage down to 1.1 or less. That resulted in a big spurt in distribution growth (howeer not in dcf). Of course, that is a trick that can only be played once. Last night the Kinder companies released 2014 guidance and for EPB distribution guidance only increased from $2.55 in 2013 to $2.60 in 2014. That is a big slowdown from the last 2 years. Anyone who really followed this should have known this was coming (you can't keep reducing distribution coverage) and now the price has to be adjusted to correspond to a lower growth MLP.
That is the reason for the drop.