"...Mathew Phillips - Clarkson
The follow-up on Brad’s questions on Mariner East, I mean, we saw the hope whether INEOS Grangemouth Saga played out over the past month or so. And it seems like they’re going to be lifting more ethane barrels than they said from the U.S. That they had additionally signed to lift ethane barrels for the Rafnes cracker, Norway. I mean, do you feel the Grangemouth imports represent fresh barrels and given the ongoing express in European refining in petchem, you feel there is a room for more of these type of transactions going forward.
Mike Hennigan - President and CEO
Yes. I do. It is fresh barrels as you know. Its public information at this point that INEOS’ original expectation was for the raptness crack as you talked about. So, yeah, they represent one of the companies that are very interested in pursuing a deal for Grangemouth now and they are one of many companies that are now starting to see that interest in, can they do a deal.
From the producer side, I think they now have another vehicle that they can try and create value and find the INEOSs of the world and the other people that are willing to engage in a commercial arrangement for U.S. ethane. So, I think it's being good. I think there’s all types of great conversations that are occurring that are creating value for the producers and consumers.
Like I stated a couple of times, our goal is to provide that transportation. We’re not involved in the commodity discussion, that’s not what we are looking for. We’re looking to provide the transportation to get ourselves a blue bar project and hopefully connect producer and the consumer in a way that works for everybody.
Mathew Phillips - Clarkson
But on Grangemouth that seems like the U.K. government stepped in and provided some update there. I mean, to get more of this project under the new government report and comment on Europe or do you think that the economics are compiling up on them?..."
"....You can’t really get rid of quite as easily and globally there’s been a lot of talk about ethane exports but the fact is to this day, we’ve only really seen INEOS at a very limited number of their facilities, talk about being willing to take ethane. Are you constructive or bullish on the prospects for increased amounts of ethane export or do you think Mariner East 2 is more likely to be dominated by propane volume?
Mike Hennigan - President and CEO
No, I think, I’m very constructive on ethane. I mean at the end of the day what you did say, is there is an alternative to go to the Gulf Coast but as everybody is very aware, the ethane pricing in the Gulf Coast is trading around gas values, so you are not creating value by going to the Gulf Coast.
So, yes, to the question, Stephen asked earlier in the call is what’s out there right today in Mariner East 2 is really trying to figure out, what is the priorities for the market. I think there is interest across the board, there is interest in propane, there is interest in butane as you stated and then there is renewed interest in Ethane.
Early on between our project Mariner West and East, and ATEX, there was some early ethane solutions. But I think, the biggest change the people become more and more aware is the amount of production that’s occurring.
And we continue to be really bullish. The liquids production that are being shown by the consultant and the producers, show that there’s a real need to get barrels out and it kind of goes across the spectrum of NGL products. So I think the challenge has been finding out which of those particular priorities fit both the producer community and the consuming community.
And that’s what we’ve been trying to figure out so that we can set our project out to meet the need. And like I said, I think we’re really close in understanding where they are, and as our expectation that we’ll want soon.."
"...We seen it expand. So there is talk about ethane, there is talk about propane, there is talk about butane. As we go forward, our expectation is the markets will continue to look to the U.S. So I mean, what everybody is seeing now is the fruition of what we believe the couple years ago when we started the Mariner franchise which was the U.S. is going to need to export.
West is exporting to Canada, East is exporting and as you mentioned Mariner South is also an export project. So all of those are pointed toward these other markets. I think you're right on that the demand side has increased their interest and at the end of the day, one of the biggest challenges that we found in this is producers and consumers are interested in the project. It’s getting those two on the same page. This ultimately needed in order for us to provide the transportation service.
Brad Olsen - TPH
Great. That’s interesting color. One other question, I’ll just follow-up with is in terms of demand for ethane versus propane export on Mariner East 2, obviously Ethane is a lot longer in the Northeast but you also do have more or less a disposal option through ATEX and the disposal option through just blending into the gas stream, well propane...."
"...Brad Olsen - TPH
Hey, good morning guys. Most of my questions have already been answered but I did want to ask a couple on marketing some of these NGL export projects. You are in a pretty unique situation as your marketing projects that are both on the East Coast and on the Gulf Coast. And I just was curious, we’ve heard some folks who are marketing pipeline projects out of the Northeast talk about some of the producers dragging their feet, or walking at some of these fixed fee arrangements just because I think a lot of these guys have already spent a lot of money getting their gas and processing arrangements in place.
So could you speak to, whether or not you’re seeing that same trend where you’re starting to see some fatigue in terms of what upstream guys are willing to pay for and have you seen more downstream interest on, have you kind of started marketing Mariner East 2, or on the Mariner South project, have you seen things move from more of an upstream customer base to a downstream customer base?
Yeah. Sure, Brad. First of all, no, we’re not seeing the fatigue that you were describing. So that one we’re not running into. As far as, who is interested in the projects, we knew all long that obviously the producers have a need and we’re trying to fill that need at the both competitive prices that we can to make our projects successful. On the demand side, we knew that once Mariner East 1 got out there and people saw that companies like INEOS and the European community, we’re seeing U.S. ethane as a support possibility. We knew the interest would increase, so we have definitely seen increase in the demand side. People are bullish that U.S. NGL market will stay as an attractive market for the overseas..."
"...I think the market is starting to recognize it more and more, as they see these developments occur and just the robust numbers that we have in our head is we think by 2016 you are going to be 800,000 plus. Some people quoted a number even higher than that, so the basin definitely needs some more takeaway capacity and we believe the highest value for that business segment is to export.....Ethan Bellamy - Baird
And is Mariner East II, is that born out of reverse enquiry from customers who potentially want more and see cheap suppliers, or is that you’ve been proactive and just trying to win future market share?
Well, it’s obviously both. I mean, we believe in the project, so we’re bringing it to the market. At the same time, the market is pressing us to, when are you going to come out with this open season. What I said is we believe we’re coming out soon. At this point, our job is to find, when is the market ready for project, so that we can go out and implement them and meet the market needs.
For a while there, I think you hit in on the head. Different people were trying to figure out what do they want to do with their barrels. So, I think it’s both. We are being impressed from the market in some regards, and we’re also presenting to the market what we think is the best opportunity.....
"...Okay. With respect to Mariner East 2, we have -- I mean we’re watching mega projects to move NGL out of the Marcellus, are there any of those big projects or competitive projects with ongoing open seasons that if those get done, you would back off from that?
Pete Gvazdauskas - Vice President, Finance
No, we wouldn’t back off. I mean, they are obviously competitive projects. There is a difference in philosophy on those projects. Those ones believe you should take the wide range of materials down to the Gulf Coast. Our belief from the very beginning of starting the Mariner concept up in the Northeast was that the Gulf Coast is going to remain long NGLs and there really isn’t a good commercial reasons to bring barrels down to the Gulf Coast if you are only going to have to export them there.
So I would say, I don’t think there is a lot of debate that propanes and butanes and NGLs are along the Gulf Coast. The debate has been around, is ethane going to be long in the Gulf Coast. Our view is it’s going to be longer than most people expect. I know a lot of people are thinking now in 2017, ‘18, ‘19 timeframe, you will get back in balance. Our belief has been that the ethane production will continue to grow and that number will continue to move out, so that we even believe that ethane is going to be long, for much longer than people think.
So it’s a difference in philosophy, but yes, they are competitive. We remain bullish that the best value for producers is to get those barrels to an export market. That’s what we’ve decided to do from the very beginning and that was the basis for Mariner West, that was the basis for Mariner East I and it continues to be the basis for Mariner East 2...".
...We continue to be bullish..as the production curves for the Marcellus, Utica NGL production continue to move upward with time.
The latest estimates of 800,000 barrels per day or more of NGL production by 2016 time frame is approximately a doubling from the current levels. We expect to launch an open season soon based on increasing market interest....
1. lower price means more unit dilution, more new units need to be issue to fund same level of capital few number of new units could have funded at the higher price . 2. rating agencies need consistency and predictability in results for investment grading and if these three operational upsets had such a material impact on the results; it suggest mwe results may still be riskier than investment grade and makes it harder for agencies to project consistency and predictability to cover longer term debt
SXL and excess liquids issue and under 1 coverage may not be totally resolved and show up in the results until end of first quarter 2014 so will not surprised it $75 level is not tested and held for at least 2 quarters
looks like mobley/sherwodd being down was a big matter along with sxl delay.
I am curious if to the full extent was contractual commitment driven "... As a result, liquids production throughout the region has surpassed the capacity of the Partnership’s 60,000 Bbl/d Houston fractionator in Washington County, Pennsylvania and its 24,000 Bbl/d Siloam fractionator in South Shore, Kentucky....in the interim the Partnership has made arrangements for continued fractionation services for its producer customer’s excess volumes through third-party facilities. As part of these arrangements, the Partnership has incurred, and until the end of the year, will continue to incur additional transportation costs and realize lower fractionation income."
thank goodness for the higher institutional ownership or mwe would rally get beat up tomorrow more tnan what I think will happen with the .92 coverage , etc
-they have similar level of cash available compared to other periods
-change in deferred revenues provided the ocf coverage of distributions thru third quarter 2013. this was first time they have not covered distributions with operating cash flow before changes in deferred revenue (.9x) compared to year ends 2003 thru 2013 final results. (covered distributions after net changes in deferred revenue included but only at 1x)
-minimum royalties are expiring at the lowest rate since 2007-2008
-deferred revenue increases are changing at a rate about 2.1 times faster than minimum royalties are expiring. 10 year average is around 1.9 so 2.1 is not bad
-raw spreadsheet numbers derived from "early" coal royalty outlook, based on an extrapolated view of Alpha 2014 guidance, suggests overall NRP coal royalties could be down 2% in best case to down 3% in worst case in 2014. Because extrapolation is based on only Alpha numbers adding a risk factor for unknowns at this early time could put coal royalties down 3% in best case to down 8% in worst case, but this again is a highly risked look. Also, aggregates could be flat to down (removing one time oci payment) and oil and gas should be up; so in aggregate if alpha raw data holds for 2014 at 2% to 3% down and with some help from expiring minimum royalties and the other business lines being flat to up, nrp could be able to hold their distributions at same level without any third party help in 2014 (ie their sponsor could step in to help which is a wildcard that is early overlooked)
cw again the article I read over the weekend says Iran still getting 80% of it revenue it needs form oil trades, so skyrocket may be over optimistic. again Libya is the wild card in my view
"...building approximately 200 miles of new pipeline of similar diameter from Natchitoches to a proposed Kinder Morgan/MarkWest Utica EMG joint venture fractionation facility with a third party that has existing facilities at Mont Belvieu. ...
...inservice second quarter 2016..3
Irene O. Haas - Wunderlich Securities Inc., Research Division
Okay. May I ask one more question? And on the operational end, you guys have done everything you possibly can really to connect up West Virginia. But it just seems like one hinge point really has to do with MarkWest plan. You only have one plan. So my question for you is, as you kind of project forward to 2014, have you worked in enough of a cushion just in case that the plant will go offline and things of that nature...
Gary C. Evans - Chairman and Chief Executive Officer
Well, it's a point that is very well taken. Remember, we're the ones that sold them the plant. It was our plant to begin with. So had our capital structure been different, we would have kept it. So the issues with MarkWest really began with the delay in getting the permits because of the location they chose. So they, obviously, had plans to put in 600 million cubic feet of gas of cryogenic processing. We had just a 200 million-a-day plant. So that is what created delays, which were really 7 months of last year. And then, of course, the issue this year was the landslide that knocked out the liquids line behind the plant. Obviously, none of us can control those things. I feel, today, things are a lot smoother. Any new plant has its start-ups and issues, and I feel like those are hopefully resolved. Now -- but are we a one-trick pony with MarkWest today? Absolutely. So we are doing everything we can to not be the case. And as I mentioned, these dry gas wells in Utica is no reason to be taking dry gas to a cryogenic processing plant. So we need to have direct interconnects with the pipelines to move that gas to Chicago and the Gulf Coast or wherever it's got to go. So we are working feverishly through Eureka Hunter to do that. As I mentioned, we're also buying firm transportation. It's very likely Eureka is going to have to put its own cryogenic processing plant or joint venture one with another midstream company in Ohio sometime in 2014..
What mhr lost in quarter which is minimum mwe lost also
"before the end of the third quarter that we had been shut-in the MarkWest, which is our only outlet for our Marcellus, as well as our Eureka Hunter Pipeline at this point, in West Virginia around the mid of the quarter. So around mid-August, we'd lost about 45 days of significant production to the tune of about 4,000 barrels a day;..."
jrad and others important caveat I should have posted. If I take out my risk adjustment for unknowns ie because this was so early my raw spreadsheet numbers derived down 2% in best case to down 3% in worst case, but again it is so early I was reluctant to project raw spreadsheet numbers in case something unexpected came in from other lessees in CAAP or prices or volumes faltered in IB or PRB or NAAP
Very sensitive. On an ongoing bases 65% to 70% of revenue currently come from coal royalties which are volume/price driven so even if price for discussion purposes makes up 50% of revenue stream directly, indirectly price will influence volumes in either direction