bbep and memp were very close in overall value creation at end of 2013 with bbep on a weighted bases just nosing out memp which was primarily attributed to their liquids advantage in valuation
"...INEOS Olefins & Polymers Europe more than two years ago became the first overseas company to contract for US-sourced ethane, first striking a deal with Range Resources and then, more recently, with CONSOL Energy, both for Marcellus/Utica-sourced ethane that would run through the Mariner East pipeline to Sunoco Logistics’ (SNX) NGL terminal in Marcus Hook, PA. In January 2013 INEOS signed a 15-year deal with Evergas to deliver the ethane by ship to its Grangemouth, Scotland and Rafnes, Norway steam crackers. It subsequently agreed to buy six new “Dragon Class” carriers—then (in November 2014) it decided to buy two more, for a total of eight. (In a hedge of sorts, the new carriers will be able to carry liquefied natural gas, liquefied petroleum gas or ethylene instead.) As part of the project, INEOS already is developing an ethane receiving terminal and a 300 MBbl ethane tank at Rafnes, and a similar terminal and a 580 Mbbl tank at Grangemouth; the Rafnes projects will be completed in 2015 and the Grangemouth projects in 2016. (By the way, Marcus Hook may not be the only site from which INEOS will export US ethane. In May 2014 it reached an agreement with Enterprise Products Partners (EPD) for ethane capacity at EPD’s planned ethane export facility on the Texas Gulf coast.)..."
Your original cost basis is not your tax basis.
1,000 units purchased @ $30.00.
1,000 units purchased at $30 per unit. Basis is..........................$30,000
Investor receives total cash distributions of $2.50/unit...............- $2,500
Investor is allocated and pays tax on net taxable income of
$.50/unit, including $2.00 of in come and $1.50 of depreciation..+ $ 500
Adjusted Basis end year 1..........................................................$28,000 ($28 unit)
All units sold @ $32.00 begining year 2......................................$32,000 (32 unit)
Gain per unit: $32.00 - $28.00 = $4.00.......................................$ 4,000
(Depreciation recapture-taxed at ordinary income rates..............$1,500)
(Taxed at capital gain rates*.........................................................$2,500)
*Assumes MLP has no “ordinary income” assets.
The above is a simple example. If one had run the basis to $0 and used non recourse debt to avoid annual taxes or had bought and sold additional units then basis is further adjusted
In connection with the acquisition, Breitburn has elected Donald D. Wolf to its Board of Directors. Mr. Wolf is the former Chairman and CEO of Westport Resources Corporation and former Chairman of QR Energy. Mr. Wolf has served as the Chairman of Quantum Resources since its founding in 2006 and is also on the boards of Aspect Resources, Enduring Resources, MarkWest Energy Partners and Laredo Petroleum.
I think the price is in a buy range now. Their distribution coverage from operating cash flow is 1.3 (1.2 removing current deferred rev) and the inverse ratio is .76 (.82 removing current deferred revenue) which means they can continue to fund some growth/pay down debt out of cash flow. 10.25 to 11.25 would be great but it may be hard to get in normal trading conditions with cold winter kicking off and coals power plant coal stock piles depleting.
November 19, 2014 | 2:44 PM
By Katie Colaneri
Reuters reports Philadelphia-based Sunoco Logistics is moving ahead on plans to build a natural gas liquids processing and export hub on the site of a former oil refinery in southeastern Pennsylvania.
The newswire obtained records that show the company is seeking a permit from the Pennsylvania Department of Environmental Protection to build a storage facility that would hold more than 2 million barrels of propane, butane and ethane.
Sunoco Logistics did not comment to Reuters, but announced plans earlier this month to build a pipeline that would bring 275,000 barrels a day of natural gas liquids from Ohio, West Virginia and western Pennsylvania to the industrial complex in Marcus Hook.
More from Reuters:
“Sunoco is basically trying to capture the international market, particularly in northeast and northwest Europe,” said Vivek Mathur, a senior analyst at ESAI Energy. “If you’re a Marcellus producer and you have an option to move product to the Gulf Coast or through the Mariner East, it makes economic sense to choose Mariner East.”
Mathur said the facility will chill, store and process enough of the NGLs to meet regional demand and to capture an export market that the Energy Information Administration expects to grow dramatically over the next two decades.
Construction of the storage tanks is expected to start after permitting is complete.
big I own both. I have posted recently on this board and the iv mlp board the comparative change in value creation for the E&P mlps over the last few years and bbep ranks first in relative value creation (and with qre merger puts two of the top four mlps together) arp is in the bottom third quartile, however they both own a diverse set of different assets and the primary two reasons arp has descended into the bottom quartile in value creation ranking over the last four years is its gas dominance and it carries a heavy debt load per unit, but interestingly this is offset by the fact it has one of the healthiest debt load per BOE of reserves; so one believes gas price will recover this would move arp quickly up the value creation scale against it competitors; so if one wants to cover and balance out both liquids and gas, production areas across the US and debt load why not own both? Again this this not a recommendation just some observations and with weakling of oil prices the oil dominate mlps like bbep could suffer disproportionately in value creation against other mlps in year end 2104 standardized measure performance (another element used in model) and it should also be noted the value creation model used, with many more variables than noted above, to draw the above comparison is a hybrid abbreviated version of the more extensive value creation model published in the oil and gas investor
details posted on investorvillage mlp board under this subject heading. investor village can be read without being a memeber
Re: - best stock?-speaking of bbep some amended S-4 forward proforma projections of dcf, distributions and ebita from qre merger and comparisons to other E&P MLP's and some merged c corps
I am watching the coal stockpiles and winter weather and then of course NRP results but no firm trigger point to re enter yet.
yes and as noted in a prior post they have moved into the top 4 US processors and noted they are on a trajectory to become largest US processor over next few years
two thoughts, follow the price of oil (nearly 76 and vast majority of MP and c corp E&P's were up ) and drip/distribution re invest
repost reply to arb
DCF is fine, but to me the two financial results I follow the closest are operating cash flow (opcf) to distributions (dist.) [are distributions being paid out operations] and the inverse distributions (dist.) to operating cash flow (opcf) [is their free opcf to pay down debt or some part of capital expenditures]. Over the long run a company must be able to pay distributions/dividends out of ongoing operations and must generate excess opcf to pay down debt once growth curtails. Maintenance can be accelerated, deferred, etc. so DCF can be managed where opcf is an audited number that is much harder to manage because most operating expenditures are a necessity.
A temporary blip in the opcf to dist ratio below 1 is okay for a high growth company (even up to 12 months) becasue of higher payables, cash interest, etc; but an extend shortfall is not good becasue then distributions are truly being paid out of borrowings instead of operations and sufficient opcf is not being generated to pay down debt once growth curtails. After 6 months in 2012 the MWE opcf to dist ratio was .83 ($177.596 mm opcf divided by $214.903 mm dist.) or inversely the ratio was 1.21 which meant MWE was having to borrow during a high growth period to pay distributions . Through first 6 months of 2014 the MWE opcf ratio is 1.28 ($356.823 mm opcf divided by $ 278.316 mm dist) and the inverse ratio was .78 which suggest they could fund some growth out of operations without having to issue new units or to borrow. Through first 6 months of 2014 mwe paid $1.73 in distributions per unit. If I add that $17.3 mm (10 mm deferred units times $1.73) to distributions paid in 2014 that would equate to effective distributions of $295.616 mm on $356.823 mm in opcf for a ratio over 1.21 (.83 inverse); so the opcf coverage through the first 6 months of 2104 would have been more than sufficient to pay the higher deferred distributions and to boot still pay for some growth capital
did not mention if vertical or horizontal (odds would be vertical for initial wells but who knows). slide 21 around 17+ minutes into Jefferies presentation
do not see where pimco is/was a big holder of ngls. looked at institutions holding of 100,000 or more units as of june 30 and could not find pimco named funds as holders
the only two things bwp and eroc have in common is they are both taxed as mlps and both managements made bad decisions on how to run the business. eroc is not a bwp in structure, risk, revenue generation or anything else business wise so using bwp to compare on any measure is your own risk
the buyback with use the rgp cash puts them in a three competing dilemmas.
1) buy back now at 9.2% when rest of market is averaging around 12.0% or wait and see if they can use cheaper unit price to buy back with less rgp cash becasue once they buy with rgp cash and if oil/gas prices do not turn around price/yield "will" deteriorate down to other E&P mlps
2) keep their rgp kitty for an acquisition with the the risk that on acquisitions if one applies the starting point of an acquisition at the simple screening point the executed number is only in the 1% or less range and if you move the starting range to initial data room visit/initial one on one contact it is less than 7% that ever get executed.
3) postpone doing anything on acquisitions as they indicated in their cc, buy back a few expensive units now, continue to deplete their scoop production/revenue and have to dig into the rgp kitty to fiance capital expenditures on current assets
could settle between $2.15 or so (13% yield) to $2.80 (10% yield) "if market continues to penalize E&P's, even hedged ones, for current oil price". could be helped for a short period (to upper end of yield) by rgp units held but at some point they will begin to spend that money if they cannot execute a good acquisition
average no eroc 12.0%
average with eroc 11.8%