I hope you are right, as I'd be a big buyer there, but the next 4 distributions are net of subordinated interest and are pretty sure to be greater than $1.50 - that would leave you in the post subordination period of this trust with a low $4 basis - i'd surely take that, even with the dismal well performance that we have seen.
PER gets a bad rap because its sponsor SD is also the sponsor of SDT and SDR (hold your nose before you load up their charts...) which are dogs. But PER has consistently cleared its subordination threshold and is likely, in my opinion, to be a reliable generator of cash.
Since I was so impressed with kaiser's research in LINE last year, I made a vow to take the other side of virtually all of his trades - after he is done with marshalling his day trader bear raids, that is - so, even though I don't own any midstreams, i backed up the truck on KMP at 71 - I am up $100k thanx to our old buddy Kev - go tigers!
don't get me wrong, i am long the stock, but cash flow stunk - dcf is the primary metric for MLPs - it was .95 - not good at all - great production and an exciting new relationship - but it all comes down to dcf
It is correct that Cliffs owns 100% of Northshore, but Northshore does not have a 100% working interest in it's production - if it did then MSB would not exist!
If ore production between CLF's different ore mines isn't fungible, then why would Northshore be the only mine to suffer cutbacks in 2013? Remember in the Fall of 2012 when Northshore idled two production lines? There was no reduction at Hibbing or United. It only makes business sense that CLF would reduce production at the mine where it makes the least margin. Looking at the actual data, it seems that they have determined that mine to be Northshore.
bear, check out the 1st quarter 10Q page 13 and 14 - read the overview and the 2014 capital program summary sections - not too bad - about a page and a half - lays it all out pretty clearly - cheers
so we have the existing wells, which account for over 90 percent of the current distribution, plus the 96 new wells that are already approved - so, the potential loss to ROYT is just the 96 additional wells that are not yet approved - but even these wells will pay only 7.5% initially to ROYT
This is probably a longshot, but what if the second 96 wells were approved before november? I wonder what the status is of their approval process. PCEC is extremely well managed - i am sure they are making every effort to have the maximum number of wells approved before november.
it will be a battleground from now through november and really probably for years to come as courts and lawyers take over. the unit value will trade more on what the latest rumor is or which day traders are shorting than on the strong fundamentals of the "existing properties". ultimately most of the prior unit holders will move on since they were investing for stability and yield. for those of us that hang in, we will have the benefit of low decline assets managed by a great team with the added benefit of pricing based off of brent - not to mention the yield is way up and will stay there.
Currently the effect of the ban would be minimal on the distribution. we only get 7.5% on the remaining properties anyway, and they represent only about 20% of total production - so, for last month, less than 10% of the distribution came from the remaining properties. Considering the unit price has dropped about 30% since the beginning of June, that seem unwarranted. Just my take. I am adding.
unfortunately ROYT is still trying to find a support level. 11.64 is broken today.
if we look at HGT, which had a litigation overhang, it popped about 50% when resolved. even though the real economic affect of a negative arbitration decision would have been about 12%. this is really where markets get extremely inefficient. there are some investors that just won't touch anything with any kind of cloud over it. i am adding today because the yield is approaching 13% and i don't think the worst case - no new wells - will be that negative for ROYT holders because we get a much smaller percent and we also get dinged for the capex.but my risk threshold is not typical.
Thanks for the thoughtful comments.
There is one thing that has bothered me about CLF and I would appreciate anyone's view. Last year the united and Hibbing mines both ran at virtually 100 percent, but northshore was more like 60 percent. I know that CLF owns a 100 percent interest in united and I believe Hibbing also. Because of the MSB interest in northshore, their interest there is less than 100 percent. So it would behoove CLF to make any necessary production cuts at northshore first. I have read that this is what they do. Similarly, capex investment etc would be favored at the other mines.
If MT did own northshore, wouldn't they be incented to maximize production?
Starting to look like maybe Casablanca will win this thing. From what I have read they would sell Canadian and Australian operations and convert domestic business to an MLP. How will that affect MSB?
I suppose if CLF was solely focused on their domestic operations that would be good for us MSB owners? The cyclical seaborne market is probably not something that we want to have anything to do with - yet it does currently impact us indirectly - CLF's management and resources have been highly strained and distracted by the challenging conditions - not to mention they are David vs Goliath there....
Welcome back Liza!
As usual, you are right. But the sponsor does have a management team, PCEC CEO is Randall Breitenbach and President is Halbert Washburn - these guys are the BBEP duo and some of the smartest managers in the upstream space. I think they are both even native Californians, so maybe they know how to navigate their way through the tree hugger's gauntlet.
I think it is more 1. the still aftershocks of the offering on june 9th and 2. the santa barbara county fracking and steam ban that will surely pass on the november ballot. the latter is the real problem - although it can't affect current steam projects (the fracking is irrelevant since it isn't done in that play), it can affect future projects and ROYT has an ambitious capital and drilling plan - this might go by the wayside - so current production shouldn't take a hit, but future growth might - flip side is we won't be funding all of that capex - also, i am sure there will be lots of litigation and hand wringing over this.
Really mad at myself for breaking one of my cardinal rules of investing - never invest in a blue state - those left coast freaks will scorch this thing if they can - and what a joke, there isn't even any fracking out there - just good for getting out the freak vote