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Inergy, L.P. Message Board

marklibera 313 posts  |  Last Activity: 10 hours ago Member since: Aug 14, 2007
  • Reply to

    OT: LINE/LNCO

    by marklibera Feb 27, 2014 8:55 AM
    marklibera marklibera Feb 27, 2014 11:59 AM Flag

    Stagg, LINE is still suffering the effects of the Hedgeye/Barrons hit job. Those that bought at the bottom around $22 now have a nice gain, even with today's decline. So just like your timely purchases with SFL, one can profit from excess movements in a stock.

    As I mentioned in a different response, you can't just look at the spot prices.

    Now I have several MLP positions so owning MLPL would just increase my exposure, which is already high. Plus MLP is leveraged so if there was a decline due to noise about tax changes or something, it would increase my loss. The distributions on MLPL are taxed as bond interest, whereas MLP distributions are tax-deferred.

    Several of the e&p firms have underperformed compared to midstreams. But I don't think they are in jeopardy of cutting distributions so I can afford to wait for a while longer to see if the companies can improve. Selling when they are out of favor may not be the best move, unless there are clear signs of deterioration in the prospects.

  • Reply to

    dividend

    by bayman667 Feb 27, 2014 9:33 AM
    marklibera marklibera Feb 27, 2014 11:38 AM Flag

    I would add that the nat gas story is not just about the NYMEX spot price but its also about the liquids (NGLS). It's also about the shift in industrial plants and utilities from coal. Eventually LNG exports may impact both supply and demand.

    Sometimes I have to present both arguments. Recently, I have been buying puts on several of the royalty trusts (SDT and CHKR) because of what I believe are defective instruments. So I spend some time debating longs that LNG exports are not going to rescue those trusts from poor performance.

    As for oil, unless we get a global recession, the price will hold up. It is possible, however, that we get a global recession. They do occur, especially when everyone is chasing yield and when low rates make malinvestment and bubbles more probable. There are also many different grades of oil and the transportation issues and costs and availabilities are also impacting this sector. The sector is too complex to just conclude that there are no opportunities to invest (i.e. CELP is an MLP that just came public specializing in frac water disposal and pipeline inspection).

  • marklibera marklibera Feb 27, 2014 11:22 AM Flag

    Sorry Sarge, but I didn't find Soulec's recent posts to be bad. Everyone can fall into the cheerleader camp every now and then, some are more prone to it than others, but he didn't do anything worse that many have done.

  • Reply to

    OT: LINE/LNCO

    by marklibera Feb 27, 2014 8:55 AM
    marklibera marklibera Feb 27, 2014 10:54 AM Flag

    stagg, taking a page out of your book, I looked up the Total Returns on LINE over the last 10 years. If I did this correctly, the total return was 199%, which is better than SFL. Where you sit is where you stand.
    I agree with you that for capital gains, there are many other e&p firms that could deliver better. I recently purchased some AR. But traditional e&p firms pay low or no dividends and have a lot of risk without the cushion of the dividend. The MLP firms pay about 10% (tax deferred) but like I have argued, the divy won't help if they cut it or if something hurts the overall business and investors begin to fear a divy cut. When buying an e&p firm, you are trusting that they know the geology and are not overpaying for acquisitions or drilling.

    There is no investment that is a sure thing, even if they have a good long-term track record (like SDRL and SFL). Industries can change. MLPs are no different and with so many MLPs, they may end up fighting over the same areas, increasing the costs for all of them and lowering their overall returns. Competition can do this. The same can be said for many sectors without moatsy (like Buffett likes to say).
    I don't know enough about geology to comment whether the shale revolution is here to stay for the long-term and which energy firms may be impacted (is deepwater exploration suffering in comparison?). Not all of the shale plays are producing as expected (the dry gas areas got hit when nat gas prices fell. But LINE is in the Permian and that is expected to be a monster play for many years (whereas the Granite Wash seems to be disappointing).

  • marklibera by marklibera Feb 27, 2014 9:59 AM Flag

    Lots of e&p MLPs are coming up a little light in their Q4 reports and their shares are getting whacked on the open. I think it's a bit of an overreaction to the headlines as many of them had better guidance, at least from what I can tell. If ARP can produce a good quarter, they stand the chance to pick up some of those investment dollars that are leaving some of these other names. On the otherhand, if they miss, look for a quick selloff. I wonder if puts are worth the insurance.

  • Reply to

    OT: LINE/LNCO

    by marklibera Feb 27, 2014 8:55 AM
    marklibera marklibera Feb 27, 2014 9:42 AM Flag

    I took advantage of the earnings miss and bought some LNCO. Will sell LINE after the bounce after the earnings call. Many of the e&p companies are reporting light quarters. I think it's an overreaction.

  • marklibera by marklibera Feb 27, 2014 8:55 AM Flag

    I know today was supposed to be an all-SFL day, but did anyone ever switch their LINE holdings for LinnCo and do you remember what the tax hit was? I just realized that they are paying the same amount of distribution and LNCO is trading for $2 less and in the recent earnings release, they stated that there would be no taxes due on LNCO distributions through 2018. The 2013 Line K-1 is not yet available so I can't access the chart that lets you see your gain or loss if you want to sell units. Selling LINE eliminates one K-1 which would allow me to add one to take its place.

  • Reply to

    OT: PSEC

    by marklibera Feb 26, 2014 9:35 AM
    marklibera marklibera Feb 26, 2014 5:54 PM Flag

    I saw the first trades go off greater than $11 (and Yahoo lists the daily range up to 11.02). Did not see it open at 10.92. Was watching it on Fidelity so maybe that is the problem.

  • marklibera marklibera Feb 26, 2014 5:37 PM Flag

    rogere, if you had read my post more closely, you would have seen that I mentioned that the 46,750,000 unit count was the total of commons and subs (I could not have stated it more clearly). I also detailed the decline in production using the MBOE figures. Desperado did a good job of detailing that nat gas production fell even more.
    As I have stated over and over, CHKR does not get the NYMEX price and we don't even know what the relationship is of their selling price to the NYMEX price. You are assuming that they will get the same % increase without any facts to base that on. You also do not seem to understand the derivatives losses.
    Your guesses on nat gas inventory and the relationship to price are just guesses and more hoping, but even if you are close to being correct, the production declines will continue and the hedging losses will likely continue.
    I expect the next payout to the commons to be whatever the targeted subordination level is with zero to the subordinates, and it won't have any lasting effect on the price of CHKR unless there is some indication that they have fixed the production decline problem.

  • Reply to

    Secondary?

    by melodius27 Feb 21, 2014 3:49 PM
    marklibera marklibera Feb 26, 2014 4:05 PM Flag

    Probably not until the recent acquisition closes. I thought I read that they would not close for 30 days. They always have the option of using the credit line to fund the acquisition and then pull the trigger on the offering when the time is right. Most of the time acquisitions close without any problem, but there is always the risk that it could not close and they wouldn't want to issue units and then not have the acquisition close, especially since they have gone to a monthly distribution.

    I haven't backtested this theory, but you can sometimes tell when an offering is coming if the stock price jumps and the RSI (technical reading) jumps to overbought levels (over 70). In pricing an offering, the underwriters have to approach institutional holders to see where demand is to price the offering. The word gets out and traders first paint the tape higher so that they can then short the stock at a higher level. Then they sign up for the offering at a lower price and use the offering to cover their short position. It is how the sausage is made in the securities markets.

  • Reply to

    The Return of the Reits-NLY

    by helmetguru123 Feb 26, 2014 11:02 AM
    marklibera marklibera Feb 26, 2014 3:36 PM Flag

    stagg, of course all real estate is local so your experience may be different. From today's article in the WSJ:
    "Still, other housing-market indicators are showing signs of weakness. Construction of new homes tumbled last month, the Commerce Department said last week. And a measure of sales of previously owned homes fell sharply in January as well, according to a National Association of Realtors report last week. Those sales, which make up the bulk of home transactions, were down to the lowest level in 18 months."

    The WSJ article did not mention mortgage applications, but that stat was in zero hedge. As for cash buyers, there have been several stories on TV about cash buyers and we know many of the private equity shops bought up much of the foreclosure properties. There have also been numerous stories about how long and how difficult it takes to jump through the mortgage application process even for the best credits. As for cars, with 0% financing still widespread (got one of those loans last month), that is driving (pun intended) car sales.

  • marklibera marklibera Feb 26, 2014 2:25 PM Flag

    Since ETN's are structured as debt instruments, the distribution is probably taxed like bond interest at ordinary income tax rates.

  • Reply to

    Check it out OT/ WLK

    by jkprice Feb 25, 2014 3:19 PM
    marklibera marklibera Feb 26, 2014 2:20 PM Flag

    jk, you continue to post many good stocks that most of us don't follow, but unfortunately, many of them are overbought. Since I can't follow my own stocks and your recommendations, maybe you can update us when some of these overbought conditions are worked off. Looks like there were opportunities to buy MANH in Nov and Jan when the overbought condition was worked off and it started up again.
    We could always use more stocks to discuss. It can get boring talking about the same stocks (even if this is the SFL board).

  • marklibera marklibera Feb 26, 2014 2:06 PM Flag

    rogere, I tried to do some of the math in a response to desperado. I don't think the price increases in nat gas will compensate for the production declines. The common units may get 70 cents based on the targeted amount of distribution, but the market is looking at the subordinated units to see what they get as eventually they will become common units. We know CHKR never gets the same selling price as the NYMEX price. We also have seen a derivative charge, so increasing prices may actually result in more derivative charges, depending on what product they hedged and at what price and volume.
    Next quarter we will see if this month's increased nat gas prices had a positive effect on CHKR's revenues. We will also see if nat gas prices hold or if they decline back to where they were before the winter cold weather caused a spike.
    So many people have been burned by this trust and the others that it is going to take more than 1 quarter or one cold winter to change investors minds about this trust and to not think that any stock price change is nothing but a trap.
    I will give you this. Another trust, PER, has been holding steady recently and has not followed the typical post ex-date decline. They had a pretty good quarter in terms of their distribution, so it is possible for a trust to stabilize if there is some reason for investors to think the production declines will not accelerate. But PER is mostly oil.

  • marklibera marklibera Feb 26, 2014 1:43 PM Flag

    I will try to answer your question. First, CHKR has a targeted distribution amount which I recall changes each quarter and I think it is slated to go up next quarter. But for the subordinated units to get a full share at 70 cents, the math would be as follows: There are 46,750,000 total units (common and subordinated) X 0.70 = $32,750,000 in net income (after deducting trustee expenses and derivative losses). Last quarter, CHKR earned $23,227,000, so to pay 70 cent to all units, there would have to be an increase in revenue of $9.4mm or about 40 percent.

    I don't know how to convert the volumes of each of oil, NGLS and gas to a common metric, but if they were equal weighted, and we assumed the price would have to increase that 40 percent, oil would have to go from last quarter's price of $96.39 to $134; NGLS would have to go from $34.63 to $48 and nat gas would have to go from 2.24 to 3.13.
    But let's also try to adjust for the likely production decline. Last quarter the decline in MBOE was from 849 to 809 or about 5%. I don't know if the production decline is equal among oil, NGLS and nat gas or how the weather effects it. For the sake of argument, let's just use the revenue figure and divide by the MBOE (23,227,000/ 809 = $28,710 per MBOE. To reach 70 cent per unit on a 5% production decline, we get $32,750,000/768 = $42,643 which is about a 50% gain.
    I have not looked at the comparison from the same periods from last year to see how the production is effected by the season going from the Sept-Nov period to the Dec to Feb period (there has been news from other producers in Ok that the weather effected their production).
    My general points have been 1) that production declines continue at least at the same pace and could accelerate, 2) CHKR never gets the same price as the stated indices, 3) there are derivative charges each quarter, which means that their hedges are out of the money or they don't deliver enough product to meet the hedges. More later.

  • Reply to

    The Return of the Reits-NLY

    by helmetguru123 Feb 26, 2014 11:02 AM
    marklibera marklibera Feb 26, 2014 11:23 AM Flag

    stagg, you are assuming that an increase in new home sales means an increase in mortgages. Not sure that is true as much of the new home sales are cash sales. New mortgage applications actually fell. Don't fall for the propaganda of the real estate brokerage community.

  • Reply to

    OT: PSEC

    by marklibera Feb 26, 2014 9:35 AM
    marklibera marklibera Feb 26, 2014 10:04 AM Flag

    Sarge, I know the feeling. The shares that I added this morning were in accounts in which I had some uninvested money with no particular investment that I was waiting for. At some point, you can be concerned about being too concentrated in one stock even if that stock represents a good buying area. And then you also risk not having any available cash for other opportunities should they arise, like SDRL.

  • Reply to

    OT: PSEC

    by marklibera Feb 26, 2014 9:35 AM
    marklibera marklibera Feb 26, 2014 9:39 AM Flag

    Just moved down to 10.94/10.95 and I bought some more. If you were inpatient and thought that it wasn't going to be marked down, you could have jumped at the opening price. Not really a big deal in the grand scheme of things, but another example of the market makers skimming.

  • marklibera by marklibera Feb 26, 2014 9:35 AM Flag

    PSEC opening around 10.99/11.00. Usually it pays to wait until the ex date to buy a stock since the market makers open the stock minus the dividend, but it looks like it would have paid to buy yesterday, get the divy and only suffer a couple of pennies deduction. Must be plenty of demand to purchase that is keeping the bid up.

  • Reply to

    NG news (seems NG is the only news)

    by obboi Feb 20, 2014 5:36 PM
    marklibera marklibera Feb 26, 2014 9:28 AM Flag

    grgsvll, I don't know if you have been following all of the news coming out of the Marcellus, but they have a lot of gas there. Check out the reports of PXDC and some of the others. Antero (AR) reports after today's close. There's a lot of gas around to meet this increased demand.

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