I would think twice about trying to arb MLP mergers if you are trading in a taxable account. By selling your BBEP, you now have a tax bill which includes a recapture at ordinary income tax rates plus a capital gain, offset by any passive losses that you can apply. You can go to BBEP's site and plug in your numbers to try to estimate what your tax liability on this sale may be. The merger announcement says it is tax free to QRE shareholders.
There may have been an easier way to try to capture any arb by using options instead of selling your BBEP. In the end, you are going to end up with BBEP shares perhaps at a slightly lower basis than what they were currently trading at (when they are issued upon the merger, they could end up declining in price), but that lower basis may be offset by the tax bill you will pay.
I hope by now you understand how the distribution (it's not a dividend) is determined. If not, you really should do some research. Hint, the trust is a depleting trust and the subordination period has ended, meaning those units will share in next quarter's distribution.
rogere, there are over 11.6mm sub units or about one-third of the commons, so once the subordination period ends, the distribution will be cut by one-third. You are correct that the "inputs" are decline in production, price and effect of hedges running off. I think you are also right about getting $4 over the next 2 years. Plenty of people have modeled out the cashflows and attempted to discount them back to get a range of values.
The real wildcard is what does CHK do with their units. As I mentioned, they value them at $7 in their SEC reports. They aren't getting any distributions now. Once the subordination period ends, I would expect them to start selling if the market price is still above that value. So the real risk is that you wake up and CHK dumps a block (Sandridge did this on their trusts and that was a big sign that things were going south).
I think you never really "catch up" unless the market price unexpectedly jumps, and then only if you sell and take that gain, since it tends to disappear. The only way to make up seems to be averaging down when the price falls after the ex-date, but only if you time it correctly. Without Yahoo carrying Seeking Alpha articles, there seems to be less volatility in the shares, so there might not be the wide swings that there used to be after the ex-date.
PER was holding up much better than SDR and SDT and even spiked close to $13, but then reversed course.
Suggest you read up on investopedia or another site to learn how record holders are determined. Hint, trades take 3 days to settle.
Vin, Fidelity has gotten much better with handling K-1's over the last few years. I don't think any of my MLP distributions were erroneously reported on a 1099 by them last year. I haven't reached the zero cost basis on any of my MLPs yet, so I can't say how they reported or how Turbo Tax deals with it. I'm assuming that if I reach those levels that the Turbo Tax will deal with it appropriately. Plenty of posters on the i.v. board who address these tax issues during tax season.
The brokers now have to report all sales of MLPs, whereas before MLPs were not covered securities, and as a result, this required some working around to get the basis correct and the amount of ordinary income versus cap gain correct, so that the reporting by the broker matched Turbo Tax. This is why I try to limit the number of MLP sales each year.
Vin, I assume you mean that you are going to get shares of KMI in exchange for KMP shares. In which case, your basis in the KMI shares will be provided by KMI (you may have to call your broker and give them the KMI info) and should equal the exchange ratio times the value set for KMI on the exchange date. You will have a gain as your KMP will be treated as a sale. You can go to the website for KMP's K-1's and plug in the numbers to estimate how much gain and ordinary income you are going to have, but it doesn't account for this year's results and for any passive losses that you may have built up.
Well there you go. Savings of 1 point. Better than a sharp stick in the eye. Would have hoped for a little better rate.
Sarge, I would be careful with anything that Cramer recommends. He is clearly riding the surge in interest in the sector because of the Kinder consolidation. The reasons for the Kinder deal have been well detailed. When you evaluate companies to be bought out, they have to have something that is in need by the other market participants. And the buyers have to be able to swallow the target. Today, the need is for midstream -- both access to the shale fields where the oil, gas and NGLs are found and the delivery of the different liquids to where they are needed, whether that is to different areas of the country or for export. Just looking quickly at BWP's footprint, I don't see anything special that a competitor needs.
That being said, now that BWP cut their distribution to 10 cents, they could clearly increase it, maybe up to 40 cents which could get you to a $26 share price in time based on a 6% yield. But I don't think anyone is going to buy them.
The calculation is based on the incremental dollar of distributable cash after the next level is reached. I believe the next level at which ATLS's percentage of the distributon increases is after ARP pays 60 cents per quarter to unitholders (ARP is currently at .1966 per month or $0.589 per quarter). So once ARP pays 60 cents per quarter (there are 74mm units per quarter plus the 2% GP take), on the next dollar of distribution, ATLS would get 48% plus 2% for its GP share.
Bob, it would take a very large premium to take MWE out. I think someone had tried before at a much lower price before MWE had completed all of their projects in the Utica. Such talk should put a floor under MWE's share price.
TRGP and NGLS are probably ripe. ETE/ETP probably come back with an increased offer. They can merge NGLS and RGP into ETP and ETE acquires TRGP. That K-1 will be a doozy.
Pale, unfortunately that tax hit on KMP is going to hurt (unless you have it in a retirement account). I have the same issue with EPB.
Well as someone who just got "caught" with some short calls on EPB, you might want to be careful. Ordinarily, selling covered calls is a great way to earn extra return on a stock that seems to be going nowhere. But you have to be careful if there is a possibility that the stock could do a transaction worth more than what you are receiving for selling the calls. With EPB, there was always the risk that KMI would eventually buy them out, but not for a large premium (and I didn't think it would happen this year), so that's why I sold the calls. The calls traded for 35 cents on Friday and today I had to cover for $5.
I could see the Cohen's selling at the right price, but not until they get all the entities up first and then get an acquirer to pay a premium for all three. Right now, all 3 entities are trailing their competitors. ARP is priced at an almost 12% yield, and others trade between 8-9%. APL is trading at a 7.5% yield and others are at 5% and some even less. ATLS is trading at 4.2% and other GPs are trading less than 3% and some less than 2%.
Stagg, many of the MLPs are rallying, part because of the Kinder announcement and part because they got oversold and have now since reported their Q2 earnings. Analysts will be out with their updates and the ones with strong prospects should rebound.