With about 20% of the stock sold short, and the equivalent of 15 days trading, there is upward pressure on the short sellers. If they are still short on May 10, they are liable for $0.43 of dividend on each share they own, or the equivalent of about $7,000,000. Based on past trends, another $0.20 in gains before the X dividend date is very likely., from the current $15.26
Just read the conference presentation posted on the CLMT web site. While things are definitely moving in the right direction, the first quarter did produce a negative distributable income. Among the troubling items is the new $400 million debt issue at 11.5%. That will create a $44.5 million drag on the bottom line. With oil prices on an increasing trend (more about that later) we can expect that the next quarter will produce a sizeable inventory gain, perhaps on the order of $20 to $50 million, improving their financials, but not the cash flow.. Since the jury is still out, and I have a small gain , I decided to sell my 2000 shares. Will buy it back when the financials look better. Oil prices will be extremely volatile. When Saudi Arabia was acting as a swing producer, it could easily control oil prices by opening and shutting the oil spigot. Now that the United States is essentially acting as the swing producer, the control of production is much less precise. We are depending on individual producers to bring in ans shut down individual wells.. I am hoping that Calumet, with 14,000,000 barrels of storage capacity, will be ale to average out those swings and come out ahead. We will see.
There are two major changes coming up that will affect NAY. The first is the expanding market for processed crude. Both the US and China will be shipping additional processed crude. This will result in new routs and new opportunities for NAT and other shippers. On top of this, the Saudi's have built new refineries to expand their processed crud sales..
The second major change is the opening of the Expanded Panama Canal. Since most of the NAT ships can traverse the new Panama canal fully loaded, they can now be chartered for voyages to the West Coast of the US or to Asian ports that were previously unprofitable. Unfortunately, not all the NAT ships currently fit through the expanded Panama Canal. I will be reviewing the tonnages and sizes to get a better handle on that number.
Both of these changes should be looked at as positively impacting the Suezmax market size.
Betting on the elections at this early date is not a good idea:
1. Hillary Clinton could implode as a result of baggage, emails, and her general lack of appeal to younger voters.
2. Bernie Sanders is getting a lot of popular support and could actually win New York AND California. In that case the Democratic Super Delegates would find themselves voting against the popular majority.
3. Sanders, Cruz and Trump represent the disenfranchised (Youth, Evangelists, and Less Educated, respectively). Those three groups represent a LOT of people. Any one of those three could carry the day if they combined their appeal. I do not think any of the candidates (all four) would be good for the country. Sorry.
The North Dakota Bakkan Oil Refinery of Calumet and MDU resources has been sold. This loss-producing refinery was a millstone around the Calumet Partners neck. Initially built to capture a huge margin in Diesel (that topped out at ABOUT $100/ barrel), with the fall in drilling and oil prices, the margin fell to $16 a barrel. THis is negative for the book value, but very positive for cash-flow and the bottom line.
Several weeks ago ROYT and BBEP parted ways, as BBEP needed to concentrate resources..They recently had an officer leave Their announcement to both suspend the dividend and payments on notes is a clear indication of pending default and likely re-organization. . I am very disappointed at the CEO and board for allowing this to happen. In their business, it is simple to project certain, probable and possible cash flows. The first principle is that you ensure your certain expenses are less than or below your certain revenues or you risk default, which is where they are now. I sold all my holdings on reading the news, and I await the fall of the other shoe.
Because the income and expenses for a hedged oil company are pretty clear, the decision to terminate interest and dividends one month after making a dividend payment certifies action behind the scenes. The most likely action is that someone has purchased a large percentage of the bonds and is offering a bond to stock or bond to preferred stock or bond to stock and warrant conversion. Such a conversion is likely to be adverse to current common stock holders, though the preferred stock holders might still do well. However until the actual agreement is made public, any investment in BBEP common and preferred. would be extremely dangerous. There might be some opportunity in the bonds however..
Sentiment: Strong Sell
NAT has been in business since 1995 and paid dividends every quarter since then. You commented to me that "The proposition that NAT is somehow far superior to other major shippers when it comes to maintenance is just idiotic". The alternative to your proposition that every shipper does maintenance as well as any other shipper makes it sound as though you have never done maintenance on anything as big as a Suezmax. From my experience on ships larger than a Suezmax I believe that doing maintenance right is very difficult, and some people and companies are actually better than others in doing so. I do not know first hand if NAT is the best of breed in this area, but somehow they seem to have the lowest operating costs,though having an older fleet.
Decided to buy back 2000 shares of NAT today, though I am certain it will drop a bit between now and the next X-dividend date. There is so much uncertainty in the world that it is almost impossible to expect a drop in the volume of crude shipments.
Any purchase of a different class of ships should be viewed negatively. If you have a fleet on one-size ships, you can manage your rates and scheduling simply and cheaply. Once you change your mix, asuring you have the right size vessel atthe right place becomes more difficult and expensive. Arranging drydockings becomes more complex, as does negotiating the repairs. If NAT diversifies it's fleet, I will stay away until we know how the costs work themselves out. The current base cost per day of about $12,000 makes tracking profitability easy. That goes away if you have a mixed fleet..
We do nor really know the numbers, yet, but a rough estimate might help.
1. Assume these ships have an operational cost of $14,000 per day or $20 million/yr
2. Assume a financing cost of 10 percent (Debt or stock issue) - should be less. or $10 million per year
3. At the current rate of $30,000 per day, how many ship-days to break-even? 1,000 ship days.
4. How many available ship days, assume 90% availability:1,300
5. Potential additional profit: of$10,000,000 at present prices..
These numbers probably represent the upper limit of costs. If we use $12,500/day operational cost and a 6% financing cost and a 95% availability, we end up with an additional profit of $17.5 million.
These numbers suggest a ROI of between 10 and 17%, which would be a pretty good deal. I suggest that everyone keep in mind that the enhanced Panama Canal will (likely) be opening later this year. When it open, there could be likely massive re-routing of tanker traffic. I have not tried to estimate the probable re-routing, but I am sure the tanker companies have. This purchase by NAT suggests that they expect a large increase in taker trade.
Note that in January Hal Washburn purchased about 50,000 shares of common for about $0.67/share. At that time he should have had a pretty good idea of what the value of the company would be as they went into a structured re-organization.(Chapter 11). My interpretation of that purchase is either:
1. Washburn is an idiot who had no idea of the value of the shares
2. He was trying to fake-out other investors or
3. He believes that the shares would be worth more than $0.67 after the reorganization was over.
Since my calculated (estimated) value of the common is between $0.50 and $1.00, I think choice 3 is the real thing, and the shares will be worth on the order of $1.00
For those remarking as negative, I was just summarizing the news , with no real opinion. to amplify: The refinery cost about $460 to build, and was half owned by CLMT and half by MDU. There was about $80,000 in total debt, paid down to about $66 million. roughly, CLMT put in equity of about $180 million and cashed out for $27 million, So the net cash loss was about $150 million, though accounting wise, due to depreciation, the hit to the balance sheet will be closer to $125 million. Just rough figures, FYI. With the additional cash in, and reduction of losses, an reduction of interest, this will be a positive, roughly again, $40 million positive kick in cash flow. I just bought 100 shares to keep myself honest.
The recent debt for stock conversion ar SDRL is actually god news for SDLP. While that still leaves around $10 billion in SDRL debt, every debt pay off or conversion reduces risk to both organizations. Apparently the market thinks this is a NEGATIVE event, dropping the price of SDLP by about $0.40/ share in initial trading. However I think this is a POSITIVE event for SDLP. Having closed out my position yesterday at $6.07 due to increasing concern about Crude prices, I re purchased. today,re-establishing my position ahead of the weekend.
All Suezmaxes are not the same, including NAT', There is some variation in MAX DRAFT AS WELL AS MAX BEAM.. In addition there is some variation in oil product density. A tanker can be fully loaded by volume but not in draft. AS I said earlier, I will need to check each of the ships to see what the load capacity is.
To me, assured value can be exemplified by a company like NAT, where the CEO has a large common stock holding, a policy of keeping debt low, a dividend policy that is clear and consistent, and is the low-cost producer in the business. The huge volatility in the stock (NAT) is due to it being a good company in a tough business.
There is still 1.3 billion in equity, and the price of oil is rising, so should their revenues and the value of their oil assets. It is now a horse race between their payments needs and the rising revenues. There may still be value in the shares.
Sold all at 15.74 to 15.85. Happy with 5% leveraged, 20% unleveraged for two weeks. Next quarter will be super interesting: The new Panama Canal is opening, the Saudi's just had a palace coup, with a lot of figurative heads rolling, and BREXIT may happen!
The SUEXMAX rates are continuing to trend between the 2014 and 2015 actual numbers. Based on the second quarter numbers, which average about 27,000 per day, NAT earnings will be between 10 and 15% below prior year numbers. The decrease in average earnings per ship will be partially compensated for by the increase in the number of operating ships. The third quarter actually looks to be a real improvement, with average rates trending upward, and the number of operating ships increasing. I'm holding at present, with an expectation of a downward drift until earnings are available.
Based on the Zacks#1 Rating, about a year ago I purchased about 10.000 SDTP at 10.0 a share. Within a month it dropped to about 5. I do not remember the exact times and dates - However the lesson to learn is that Zacks is never responsible for your gains or losses, and they are often WRONG. I have made more money buying their 3's on 4's than I have buying their #1's
Just for your info: I copied the dividend history chart on the NAT website on April 18, On the spreadsheet, plain as day, the first quarter dividend of $0.43 was listed, BEFORE today's announcement. I have proof, since I sent it to my bro.
The SuezMax spot prices are currently tracking between the rates for 2014 and 2015, but closely track 2015, Based of the current $043 for Q1, which compares to $0.22 last year,a dividend in the range of $0.40 to $0.76 is likely, if the rate trend continues. If we want to pick a number, and assuming the newest ships are all operating, I would be willing to bet on $0,61