Its all about NGLs...
and while the upcoming Q will not be stellar.... its not as bad as some would have it....
Gut tells me it is slightly better than Q1....
It is no where near as simple as you suggest when a large % of the proceeds will be taxed at regular income rates
Far better to be selling calls and or buying puts.... not a bad idea to go short against the box.... For all my criticism of EPD it will be back in the long term... it is the near term that is the issue....
While oil and gas prices are the primary driver of this selloff Fed action continues to loom large... that can cause the selloff to accelerate.... or out of the blue... while the Fed is raising rates... energy could rally... completely negating the affect of a rate hike or we could see strength in the equity despite a rate hike
It is impossible to read right now... but IF energy does not rally before a September hike in rates the pain will be much worse than it already is... there is also the factor that when rates rise the dollar will strengthen so oil will probably take a hit IF we don't see a shift in the supply demand issues
I have been short against the box for some time... which is why its easier to swallow this... I will cover prior to ex-div and then decide what I want to do again there after
Well to start they could hit Saudi Arabia with a tarrif of 2Xswhat they discount Brent for when they sell it into the US market
They are still selling at approx a $4 discount.... And since US refineries are set up to refine Heavier Brent it is cheaper to refine than WTI and LLS so the refineries jump at it with the discount vs the US crudes
DC could suspend the crude export ban and export to Europe where there are refineries set to refine Lighter oils.... Send the POS Saudis a message.... Because IF we export light US grades to Europe the Saudis would be forced to discount to the WTI price.... See how the like selling at a discount to $45 instead of a discount to $52... Fight fire with fire
But you would need an administration in power that is respected by the Saudis.... One that negotiates from a position of strenght.... Opps.... Really didnt want to reference Iran
NOTHING has fundamentally changed with EPD.
while costs have dropped significantly and coverage of DCF remains very strong when a companies revenue is off by over 40% and the shares are off 30% its illogical to say that nothing has fundamentally changed
This is not a short term movement... rate sensitive equities have a further drop ahead... a Fed move will hammer MLPs... unless there is a corresponding strong rally in energy commodities... I think energy commodity strength is still a ways off so we will probably see a FED move before the energy recovery
There is a large fortune to be made if you get this timing right... good luck
and I was ranting and raving that EPD would not be immune....
That GDP would take a huge hit... that the energy sector would see massive layoffs...
and I was mocked.... told that consumer spending and retail jobs would make up for it..
Here's a paragraph from Bloomberg today...
Exxon, the biggest U.S. energy producer, reported July 31 its lowest profit since 2009 while No. 2 Chevron posted its worst results in 12 years. Chevron earlier last week said it would eliminate 1,500 jobs in an effort to cut $1 billion in spending.
BP, Shell, Schlumberger Ltd. and Halliburton Co. have announced thousands of job cuts in recent weeks as they prepare for a prolonged stretch of low prices. Since the crude rout began last summer, the industry has eliminated 150,000 jobs, according to Graves & Co., a Houston-based adviser that has closely tracked the cutbacks
I wonder how many $8.75/hr retail jobs were created to make up for that..... 150K $100K+ jobs that were lost...
I wonder how many energy sector workers took those $8.75/hr jobs and if they did how their families are making out and whether their mtgs are being paid and new car... new appliances are being bought
These issues do not even touch the effects on GDP but they should be evident to every EPD holder because EPDs revenues will be off $20 Billion this year... basically because of commodity pricing
I ranted that the administration had very dirty hands in this... they want green energy... they continue to allow the Saudi's to engage in unfair trade practices by selling oil into the US at a discount to Brent....
The Obama lovers told me what a boon cheap energy would be for the economy.... well gas where I live is about $3.25 gal as oil sits in the $40s... some savings.... less than $10 a week
The libs need to wake up and understand that IF they win the WH again... its only going to wet far worse in this sector
EPD has virtually no short interest... 8.7 million on 2 billion shares... 4/10s of a single percent... CHK and RIG both have short interest in excess of 30%
shorting has zero impact on EPD... I would hate to see what would happen if shorting did occur
Distribution will continue to be paid.... I would not drip... hoard cash for a # in the low $20s
as an offset to our debt... while crushing the Saudi's policies...
That makes way too much sense for anyone in DC to go along with
their earnings, DCFs, payout ratios, effect of oil/gas price on businesses and cannot come up with one good reason as to why there has been such a quick and massive selloff across the board
REVENUE..... REVENUE.... REVENUE.... its off 40+%
SEC doc filed yesterday after the close...
The likes of Brian Nelson will feast on this...
$2 Billion @ $27 is 74 mil shares
$2 billion @ the highs of $41 is 49 million shares
Which is why I believe that more DCF should be directed towards defending the units value
That excess 25 million shares will cost $32+ million in distributions a year...
I just think had the distribution been 1/8 of a cent greater over the past year... with another 1/8 given this past Q the units would be in the mid $30s at worst shaving the excess by about 1/2
It also means that yesterdays action was manipulated by the underwiters... the list of which is impressive
In EPDs bull phase over the past years secondary's were mere blips on the radar.... we can only pray that this one garners the same results
No difference in my book... the stock will trade down to factor in the dilution which is the same as a secondary discount
75 million shares is alotta (that's Italian for many) buyers that have to be found
This $2 billion is a whopping 4% dilution... which just happens to be the approximate pop the underwriters gave the units in their manipulation yesterday
what IF the underwriters (or their clients) have naked short positions... which they can now just close at a whim without making open market purchases
EPD has an insanely low reported short interest (8mil) for an equity that has taken the beating it has
ATM means that the shares can be sold in small batches at really any price... at any time
And we don't find out the damage till after the fact.... how much dilution came from the $2 billion
I'd much rather see that EPD could line up buyers on a secondary at a discount
Right now we can only conclude the institutions that would normally buy into a secondary have no interest in buying... that with the miniscule short interest those institutions
are the parties that have been selling
It would be a blessing at this time if they were able to float out a bunch of those ATM shares on the Mexico news that gave us the 5% pop earlier this week
SEC filings do not lie.... in fact its a felony to lie in an SEC filing
EPD has a $2 Billion offering on the table... dated 8/10... whether its ATM or a secondary is beyond the point... and my belief is that a secondary is better than ATM
That we saw today will take further toll on the sector.....
Caution is necessary as lower share price could come with lower yield....
We are in but the eye of the storm.... I would only make limit offers below the bid because with the lack of liquidity you can take it hard in the rear as evidenced by Mondays close
Those batteries will start more fires than the local fire department can handle....
Imagine... your Chinese made solar panels store power in your Chinese made batteries..... you should have as much faith in that working as you have in the Chinese stock market not being rigged
If you haven't learned anything about Chinese quality from all the Chinese made Krrap your wife bought from Bed Bath and Beyond over the past decade... and now sits in a local landfill....well then you are clueless