marv, love the posts and agree that MMP, ETE and EPD are great. But I am seriously thinking of punching out. All of their charts have turned and if this bear market really gets going, they all will be available much cheaper. You make good points about m&a possibilities, but you can't always expect a great premium in a buyout. In this market, the buyers (KMI and ETE) don't have to overpay. We saw MWE sold for a much lower premium (if you can consider it a premium considering many including me thought that $90 was achievable). Plus deals will mostly be for stock and the acquiror's stock will likely get hit after a deal is announced.
Some will say that it is too late to sell, but that can only be measured AFTER we see where these bottom.
I am happy with SFL and will probably stick around to collect the divy. However, holding anything into October is especially risky.
Ok, so I'm here to offer my opinion that management stinks. The stock has gone from the mid $20's to $3 and the distribution has been cut in half. Those are facts. My opinion is that it is partly due to inept management -- running debt too high, and paying too much for properties at the top of the market. Manye&p MLPs are in the same place so they all can be painted with the same brush, but that's just a convenient excuse to avoid critiquing their management. These guys are paid huge amounts to understand the dynamics of supply and demand -- not just to say "oops, no one saw this coming."
And it's important to know management's history when it comes to their projections. There's a record and it's relevant to ARP that the distribution for their gp ATLS was mis-projected numerous times. Do you think Cooperman would be so upset if he thought things were going well? He said it best on the last conference call.
Are you going to post this on every e&p MLP message board? How much are they paying you? Whatever this guys track record is in predicting the price of oil, you don't think he might just be a bit conflicted in trying to get the price of Shell stock up so that his options or restricted stock awards go back in the money?
I wish I were short from the mid teens instead of being a trapped long. T, hankfully I sold some shares at $9 and then at 7. Thankfully I also sold APL before the merger with NGLS and ATLS too and didn't fall for Cohen's baloney projections of paying an annual distribution of $1.35 on ATLS which has been revised downward three times, suspended and then eliminated for 2015. How do you longs explain ATLS and the missed projections-- just bad luck?
JR, one more thing. Just looked up SDR and SDT to see how they are doing. Yahee says they are yielding in the high 50% range, so that gives you an idea where CHKR is heading if you are trying to apply a yield to their future distributions. Also, you should familiarize yourself with the taxation. I seem to recall that part of the distribution is treated as interest because of how the wells are structured.
The bad thing about being a trust is that they can't add any hedges when the price of oil or gas rose. They are basically stuck with the hedges that were assigned to them when the original properties were contributed. They also can't buy any properties. Then there are the fees and the fact that CHK operates the wells and basically can purchase the wells back from the trust.
Jr, funny to find you here. I haven't posted here in a long time, but see my old friends grgsvll and rogere are still here.
Here's the scoop on CHKR. Their hedges come off in mid September. Their distribution has been going down, but because CHK has not finished drilling all of the wells that they promised, the subordinated units stay subordinated and don't receive a distribution. Once CHK finishes drilling, then the subs convert to common and the dividend per share will go lower. I can't remember but CHKR is mostly gas so it's funny why it runs up when oil runs up. But they sell their gas for much below the NYMEX price.
Best advice is to find Dan Moore's analysis.
I started out as a long CHKR holder but then luckily got out with a profit when the similar-themed Sandridge trusts started to tank. Even made some good money on puts when the stock would go into a dive after the ex-date. One could try to trade it, but best to avoid. I think the puts became harder to trade with wider spreads and not as much price decline after the ex-dates.
You mean like Apple. No, leaks about performance only happen to stocks that need to be pumped up. That would never happen to any company whose growth is never in doubt. No company as reputable as Apple would have its CEO send an email to a shill like Cramer to stem a fallout in the stock price. Maybe some pennystock or an energy company. But not Apple.
Why don't you take out a second or third mortgage (just like ARP has done), bet it all and not sell until the stock gets back to the level where it came public.
What nice gain? I want them to support the stock price, and paying out your cash does not seem to be working. The market is not paying up for a 25% distribution because it knows it is unsustainable. They are in essence eating principal. They aren't covering the distribution now, so what happens when the hedges roll off? Unless commodity prices spike, hedging will be at lower levels than they currently have. Meanwhile they aren't going to be able to do any asset sales at these commodity price levels and they can't buy any assets yet because the prices aren't bargain basement yet. So they are in no man's land and the stock will drift lower. No one knows when there will be a sustained rebound in oil and gas (unless the Saudis announce they are curbing production).
First, the analysts are usually conflicted because of their investment banking relationships. Which analysts called the downside in any of these stocks? They get their info from management, plug it into their spreadsheet and spit out a target. Then whey management misses their projections, they adjust their targets down.
Second, Wells has been saying that ARP and several others have high risk of distribution cuts because of their debt covenants.
Third, book values mean nothing (just like bank book values meant nothing during the financial crisis). Impairments can and do occur regularly. Remember those Arkoma assets that ATLS bought and then dropped down to ARP at roughly 60% what they paid for them.
Can the stock bounce? Absolutely. But further increases are going to be tied to the price of nat gas and there's seems to be just too much of it. Meanwhile ARP has a debt issue. How did they deal with the last time they had a debt covenant issue in March 2015? They cut the distribution 50%.
Before one places too much confidence in the effect of hedge books, one should look at MEMP. Before the collapse in MLP share prices, almost everyone was boasting how great a hedge book that MEMP had. They had something like near 100% of their production hedged into 2017. At that time, MEMP was trading in the mid-teens. It is now $6. The point is that hedges are only part of the story and another part is the debt levels and covenants.
Finally, soon we will be into tax-loss selling season, and many of these MLPs are going to get sold to take losses.
You guys need to do some math. They are paying out a distribution yield of 25%. There are no acquisitions that yield as much unless the price comes down to 4 times EBITDA (i.e. the inverse of 4 is 1/4 which is 25% and that doesn't account for maintenance, the gp share etc.). I think LGCY paid over 6 times. The best thing they could do now is to use the 60mm (which BTW was $75mm when they announced the sale -- what happened to the $15mm?) to buy back stock. In fact, they should draw the entire $500mm on the credit line and buy back stock. The entire market cap is $400mm and they have $560mm in cash and credit.
But you heard it on the conference call. Walker needs the distribution because he owns a ton of stock that he bought at $22. They can't find acquisitions that are accretive to DCF. They can't even do a jv for their Utica assets after having spent 3 years telling us they were worth $1 billion (or $40 per share). They are a deer in the headlights.
It's so funny that people attack anyone who has a bearish view. Let's look at the facts. This stock came public in the mid $20's and is now $3. Back before they cut the distribution, did they warn about the approaching debt covenants? No. It took some digging into their SEC filings to see that they were approaching their limits. As a result, the distribution was cut by almost 50% in March. Over at ATLS, at the time of the TRGP deal announcement, they said ATLS would pay $1.35 in annual distribution. Then they cut it to $1.10. Then they did a reverse split. Then they suspended the distribution until Q2, then when Q2 came around they suspended it until 2016. This is called a record.
If you are "dependent" on the distribution, then ask yourself how much sense it makes to be paying out 40% when your debt is nearly 5 times EBITDA. How many companies outside of the e&p MLP universe pay 40% yields with these debt levels?
And it's not just ARP. Many of the e&p MLPs find themselves in the same situation. Weren't these MLPs supposed to hedge their cashflows so that a decline in commodities were not supposed to affect their cashflow? The truth is many of them were using the easy access to high yield debt to splurge on expensive acquisitions to create the appearance that they were growing to maintain their high distributions. Let's see what happens next year when their debt covenants revert back to the 4.25 times level. Then we will see how safe your 40% distribution was.
Its amazing what this thing called the internet has:
The NYMEX Strip, or “12-month strip” is the average of the daily settlement prices of the next 12 months’ futures contracts, and is a good indicator of where natural gas prices are for the next year.
Gambler, I am avoiding WMC after having sold it after the dividend payment. I think they are going to reduce their dividend again down to 50-54 cents. While that is still a great yield, the market reaction could be bad. Also, while I don't expect the Fed to raise rates in Sept, if they should, I think Bob could be right that all mREITs could be sold. I might consider WMC if it dropped to $10-11, but with the possibility of that divy decrease, I would rather have that pass before I invest. good luck
I am playing SFL for a bounce. I got some shares before they reported. The past pattern of the market is to see some good sized bounces, especially after the recent declines, but one has to be careful and not get complacent into thinking everything is ok. Even if the market were to make a nominal new high, I think we may have reached an inflection point.