"But that potential could make $50 a hard cap, short swings aside."
I agree with some of your points with respect to "shale revolution". However, there was a confluence of events that made it possible in the first place. Higher price made it a worthwhile and lucrative endeavor, and easy financing and open capital markets were "manna from heaven". Now not all of the players will enjoy the same benefits of the bygone era and banks will be shy to put more capital at risk. Financing new projects will be challenging and effect of depletion will be evident wihout fresh drilling, not withstanding efficiency gains thru deployment of smart technology.
Low prices have increased demand everywhere. Miles driven in USA is post-recession high. The biggest worry is the "black box" of Chinese demand, how much is being hoarded there? I believe their end usage is much lower than their imports and demand hiccup there will trip up supply/demand dynamics once again. Finally, cannot underestimate the vicious capital cutbacks of last two years and concomitant effects that will have on reserve replacement and production going forward.
There are some changes to different Alerian Indices that should be net positive as NGL and CEQP are added (in addition to some others) and the fund is forced to buy. This might be one of the reasons why this melt-up is continuing. The changes will have to be completed by next Friday. Mechanical changes of this nature work both on the way down (when there is a sector wide sell-off ) and at times like these. Will take it any way it comes.
No way I come to that conclusion from the following, and I quote.....
"With the proceeds from the Con Edison transaction and the decision to reduce our distributions to a more appropriate level given the realities of the current energy market, Crestwood will materially reduce our long-term debt and gain the flexibility to invest retained available cash to drive long-term value creation for the partnership. We believe these strategic steps will significantly improve Crestwood’s investment profile with a top tier balance sheet, strong distribution coverage, and ample liquidity to execute our 5-year plan without accessing the capital markets."
To retain liquidity to execute their 5-year growth plan does not equate to keeping the distribution flat. Plain and simple. All PTP's in energy field would want to gradually increase their payout. Sitting idle for five years? Come on....
"They plan on holding the distribution constant for at least 5 years,".......
I don't understand where you are getting this information from? I highly doubt that the company would make such long term prognostications. The management would be shooting themselves in the foot by being so gloomy about future prospects, as no increase in distribution would imply no improvement in cashflow. Please site your source.
Happy for your success. I am riding this "midstream" boom with you as well. I lost a bundle on upstreams and my account took a massive hit late last year. I have to say I am grateful for some tremendous info on these message boards which literally help me when "chips were down".
I have not reshuffled the deck as frequently, It is just not my forte. I switched my ETE for a quick gain and rotated out into AMID sub $5 and that was fortuitous timing. I have seen time and again that "staying put" has its own advantages, the most precious being premature tax hit. I could have traded without any consequences (with loss carryovers) but it is so hard to be right twice in a row. I stick to my knitting. The portfolio yield is still massive! I should get my bond interest payment tomorrow. Hurray! My first ever....thank you for your help in this venture!!
Positive trades based on short term market movement expectations are pure co-incidents or lucky breaks, eventually some moves will be suboptimal, or downright disasters. In your current situation, tax consequence is moot and that gives you a free rein. I let the events play out, not knowing or guessing, and always being prepared for temporary drawdowns....one can't avoid them going for ultimate superior outcomes. It is next to impossible to move in and out price and tax efficiently, let alone keeping your emotions in check. I guess trading is not my forte!
Can't argue "relative yield" equation as is currently construed. However, FR will make sure to provide ongoing support to strengthen the partnership, if only to safeguard their massive stake. Then there is Permian expansion to kick start revenue improvement, which will happen across all the divisions if energy price cooperate. In the meantime, they have become ultra-safe and that in itself should attract more participation and interest from a new class of investors.
Thank you, Harehau. I will be seeing my CPA this weekend and I will get an answer which will decide my future course of action. If I was not sitting on loss carryovers, I would have long sold this off. I have a sizable holding and as such want to ascertain tax consequences.
Let me ask this: If a person like me who is leaning toward holding this thru this taxable pass-thru event, I know I will incur this capital gain allocation. However, I have more than enough capital losses accumulated from last year. Wouldn't these negate any tax consequence for me? Not asking for tax advise...just wondering. I have spent countless hours researching this and unfortunately could not find any useful info. Thank you or anyone who can shed some light on this for me.
"That's a pretty good reason to be out of the units until after the deal closes, because whoever is a unit holder of record on that day gets nailed. Cash money, to the Treasury, and zero benefit until the units are sold.".....
What if a person is sitting on a sizable capital loss carry forward that has remote chance of getting used up quickly? Would not this create a parallel write off of this phantom liability and result in unit cost step up? Unfortunately this applies to me after a horrific last year from upstream losses and I am torn between selling CEQP now and booking the profit and buying again after the ED deal closes. It is so hard to predict how the unit price dynamic will shake out. Thank you, Professor, for sharing your expertise in this matter. Appreciate it very much.
All I can say is WOW! What a fortuitous timing. If you were a small trader, may be SEC would come looking for suspicious trading. Home run while sleeping at the plate!! Congrats. Very happy for you.
I have had the same set of thoughts and have a much heavier position in CEQP vs AMID. I believe that if and when CEQP announces further deleveraging steps and reduction in distribution, the excess cashflow will make it much more safer. I do believe FR will not waste any opportunity to "right the ship", so to speak, and are determined to bring it back to some semblance of sane valuation. Having plunked so much in unit purchases and announcing their intention to buy more, their motivation is beyond reproach. I think patience will be a virtue.
More deleveraging and shoring up the balance sheet by disposing of the remaining 3.2 million units of TransMontaigne to ArcLight entity.
"On April 1, 2016, NGL and TS sold an aggregate of 3,166,704 Common Units to Gulf TLP Holdings, LLC and TLP Equity Holdings, LLC, entities affiliated with ArcLight Energy Partners Fund IV, L.P. (“ ArcLight ”), for an aggregate purchase price of $112.4 million pursuant to a Unit Purchase Agreement, dated April 1, 2016, by and among TS, NGL, Gulf TLP Holdings, LLC and TLP Equity Holdings, LLC. Accordingly, the Reporting Persons no longer beneficially own any Common Units."
"The Sellers agreed to the amendment to provide additional time for the Buyer and Crestwood Midstream Partners, LP (“Crestwood”) to enter into definitive gas gathering and processing contracts to replace certain existing executory contracts between certain of the Sellers and affiliates of Crestwood. A final order of the United States Bankruptcy Court for the District of Delaware rejecting such executory contracts is a condition to the closing of the transactions contemplated by the Purchase Agreement.".....
So as I surmised, there are some behind the scene agreements being negotiated and plans hatched out, starting with this fifteen day extension between Quicksilver and bluestone which is a result of delay in court judgement and their transaction deadline expiring. There is the reference to providing Bluestone and Crestwood time to finalize a new (meaning reduced rate) gathering agreement which will only come into play if the court sides with Quicksilver and strikes down the existing contract as part of the bankruptcy proceeding.
The wait is not over. What kind of discount will Crestwood be willing to give for certainty? I think there is hope for a more moderate outcome and not the doom and gloom of total abandonment of Crestwood pipeline system by the new buyer as many were pricing in. This should also help CEQP unit price.
"They didn't get it, apparently. Does that mean they walk? Is the case therefore moot? "......
I have been waiting for the decision with a bated breath and was expecting some news by this evening. May be there is some sort of announcement tomorrow. After all the posturing by Bluestone to not even wanting to negotiate, may be something was brewing behind the scene and a deal struck that can be claimed by all parties as the best possible outcome and save faces. Anyway, that is my best guess for the moment. We will know for sure soon. In any case, this will go a long way in resolving the uncertainty that is clamping down CEQP unit price except for last week or so.