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.
"Even if it goes to $20 first, if they're short at $5, it's still going to zero."
Ah, but they could be forced to cover at $20 (for example, due to the owner of the units selling them to someone with a non-margin account). So they have a huge loss even though they are right. Plus you didn't take into account the huge interest cost in borrowing WHX units. Even shorts likely can't make money on this security, even though they know it is going to zero.
"the industry did not drop as much as PGH did"
many of the former Canadian trusts did in fact drop as much. Several of them no longer even exist now.
My assumption is that there is no more fracking once the drilling obligation is complete in a year or so. So the question still stands...how long will these wells flow if there is no further fracking or "work overs"? Yes, no doubt the wells could keep flowing a long time with continued fracking. But that misses the point that this is a trust with a fixed drilling obligation which finished in a year or so.
Dividend channel doesn't know anything about SDT. What's negative about saying that? Unless you have some personal connection to dividend channel.
"Liza: Would you buy SDR at this level?"
Well, I did, however not sure whether I should have.
In other words, I would nibble but not bet the farm.
Should be a profitable investment at the price but I don't have huge confidence that expectations will not be lowered again.
Sorry for not having a stronger opinion.
"Canadian oil would have to go up over 40 dollars a barrel and you believe that will happen?"
Don't know what you are talking about - I never said anything about Canadian oil going higher than Brent. I simply corrected your misleading comparison of comparing Canadian heavy oil versus US light, sweet. When you compare light sweet index prices from both countries the difference is about $14, not $40.
The US also produces heavy oil and that too is priced much lower than WTI.
Anyway don't know why we are talking about Canadian oil. The reason for WTI popping a bit today was the announcement that Southern-Keystone will be in service in early January. That will help drain Cushing which should lead to narrowing the spread of Brent-WTI like we saw earlier this year. It is very possible for WTI to be at a premium to Brent (it has been for most of history), especially if the US is forced to change the law prohibiting export of oil.
VNR did, LINE and BBEP not.
I complained to LINE IR about it and got nowhere.
I don't like the way the transition deprives us of one monthly payment over the lifetime of our investment (by pushing the record dates back by a month).
you incorrectly posted that Hydrogen does not exist freely 9whatever that means) in the universe back in Feb, 2013..."
I stated on earth, not in the universe. Or are you suggesting some company will start hydrogen mining in the sun?
The key word was SOURCE, not fuel.
What does your dictionary say about the word SOURCE?
same argument would go for longs. So by your logic we should not believe any analyst who owns any stocks, long or short. We should only believe people who are not game enough to put any money behind their convictions. How stupid is that? Only believe writers who don't believe what they write enough to have any financial interest in it.