they might, but ETE already controls the GP, so not much chance of success. That said, they're a fairly mercenary bunch, so if someone really wants to overpay I'm sure they'd consider selling it all.
One, they're buying in all the RGP common units that they don't already own at a discounted price. Two, RGP projects will have lower cost of capital / better access to capital with higher credit rating. Three, I'm sure there will be lots of G&A costs they can eliminate by administering one company instead of two. Four, lots of people (read: investors) don't like how complicated ETE/ETP structure is, so anything that simplifies it makes it more attractive to future investors. Is it a huge impact for ETE? No, but it's just another step forward with basic mgmt blocking and tackling.
normally I don't pay any attention to stuff like this, but $40 was a pretty hard double-bottom last fall, so I suppose it's not surprising that it would be a ceiling now -- today's high @ 39.59 just a little too convenient?
Thought these comments (from Charles Sizemore) were interesting --
"Yes, the fracking revolution has turned the U.S. into an energy powerhouse again. American crude oil production is up 45% since 2000. And Russia and Canada have seen even bigger boosts to crude production, up 56% and 78%, respectively. (Note: Data are for crude oil and lease condensate and are through September 2014; they exclude natural gas plant liquids.)
Yet production has collapsed in several traditional producers, such as Norway, Mexico, the United Kingdom and Venezuela. Overall, world output is only up about 13% since 2000. That’s less than 1% per year.
The crude oil glut is looking a lot more like a dearth of demand than an abundance of new supply.
Some of this is due to efficiency gains, of course. But we’re also seeing warning signs elsewhere. Retail sales were lower in December…despite the drop in gasoline prices that was supposed to give consumers extra cash to spend. The 30-year Treasury bond yield hit new all-time lows last week — yes, as in the lowest yields in history — and finished the week yielding 2.44%. And core Consumer Price Index inflation, which excludes energy and food, came in lower than expected at 1.6% for the year."
Kind of supports the idea that fracking growth is an independent trend that is larger-scale than what is happening in current market and will continue to be necessary to meet worldwide oil demand. Couple that with what is happening in domestic nat gas market, the LT outlook for HCLP continues to be bright, IMO.
this isn't the average MLP... profit margins on selling sand are ridiculous compared to operating a pipeline, there's no way they can shield it all with non-cash charges.
" Year over year, we have increased our quarterly distribution by 32%. We remain committed to delivering double digit annual growth in our distributions to our unit holders through similar quarterly increases.""
After all the speculation and forecasts and what-not, at the end of the day, money talks.
Realistically, you have to expect that a certain % of these "long-term" contracts will wind up being renegotiated. Even if HCLP has iron-clad language where they don't have to, if you're running a business in the real world you need to manage your relationships with your customers, and if that's what it takes to keep your customer, you do it if it makes sense. It does them no good to take a hard-line enforcing current contracts at customers' expense, if you piss them off and they jump to your competitor as soon as contract is up. Especially with all the sand companies adding so much capacity. Renegotiating volume commitments/flexibility in favor of longer-term and/or better pricing might make sense for everyone, even if there is a short-term hit to cash flow.
That's nice as far as it goes, but the reason things are selling off isn't because of current drilling, but what happens 6-9-12 months from now. I think HCLP will be fine even so, but these ultra-short-term "everything is fine" articles miss the point.
your event risk on the short side is simply that the Saudis/UAE announce a "deal" after all to reduce production, and oil shoots up $30 overnight.
no one cares anymore about 2015 hedges -- the questions are, a) what does bbep's profitability (and distribution outlook) look like if oil price recovers to, say, mid-60s instead of mid-90s; b) what happens to their cost of capital for developing and maintaining production; and c) what happens to current equity holders if they need to raise new equity at terms that are massively dilutive to current shareholders?
This is nothing specific to bbep, of course, they apply to all leveraged e&p and related companies, but those are the risks that are driving the latest rounds of selling, not the 2015 cash flow/distribution.
if the price of natural gas liquids is down along with oil & nat gas, that should reduce APU's cost as well, shouldn't it? And current frigid weather should be supporting retail price? So APU should be pretty well positioned for current market.
nope, that was *sale* price in the 30s. Yahoo won't let me post a link to the article -- apparently you are no longer allowed to include links to people who don't pay money to yahoo -- but this excerpt gives you the idea:
Crude prices on the NYMEX fell below $50 a barrel briefly on Monday, but managed to close the trading day at $50.04. Tuesday morning the price fell to $48.47 in early electronic trading.
The really bad news is the price that Plains Marketing is offering to pay for crude oil produced in the Bakken shale play. Williston Basin Sweet (equivalent to WTI) fetched just $33.44 a barrel on Monday; Williston Basin Sour fetched just $24.33. No other grade of crude on the Plains price bulletin was priced lower than Williston Sour.
In our earlier look at the top producers in the Bakken, we noted the added transportation costs of $19 a barrel for Bakken crude headed by rail to the east coast and $11 a barrel for crude headed to the Gulf coast by pipeline. Adding the transportation cost to east coast refineries to the posted price of $33.44 gives a price per barrel at the refinery of $52.44. Because east coast crude is benchmarked to Brent, not WTI, the price paid was 1.2% below Monday’s closing price of $53.11 per barrel of Brent.
The calculation for Bakken crude headed for the Gulf coast is similar, though slightly worse. The impact on Bakken producers’ stock was immediate and unpleasant.
I think the basin that's really getting creamed is the Bakken -- was reading that prices for Bakken crude are $30 and lower, because of the extra transportation costs to ship it via rail or truck.
I'm assuming (and hoping) that all of these sand companies will take a break from the relentless capacity expansion projects they've all been pursuing... if so, that should free up more cash flow to fund a distribution increase.
First off, like several other posters, thank you for your service. Not to belabor the obvious, but this is a small, leveraged, risky oil company. As such, I would suggest you hedge your investment in BBEP by splitting your money with another company that is completely different, such as a large, blue-chip company that will benefit if oil continues to decline or stay down. Something like UPS comes to mind. Also suggest splitting your BBEP with another MLP that is more nat gas, less oil, like VNR.
Putting all your eggs in one basket, especially something like BBEP, is silly. Please disregard everyone talking about the 2015 hedges: it buys a couple more quarters for the distribution, and that's all. The market is discounting the risk beyond 2015 if oil stays $60 or below, and that a company like BBEP runs into serious liquidity and/or balance sheet concerns that permanently trashes the equity holders. Not trying to knock BBEP -- the profit potential is certainly real -- but simply being realistic that a company with a reasonable chance of tripling your money in one year has a reasonable risk of the exact opposite. Good luck.
I can't imagine that they would borrow to pay distribution... they will want to preserve as much borrowing capacity as possible for development expense + build up liquidity against whenever their next maturity is + (hopefully) the ability to buy properties at fire-sale prices, which you have to assume will start to be available. The smart thing is to look at what their cash flow will be in 9-12 months as hedges roll off assuming current prices, and cut distribution to that number sooner rather than later, and build up a cash/liquidity reserve with the difference.
Based on their latest table of price sensitivity, they'd be at about 85% coverage at current prices. But only 30% of their oil is hedged for 2016, so presumably as 2015 progresses and current hedges expire, that coverage will get worse and worse. In current environment, not maintaining conservative coverage of at least 1.1X coverage is simply silly. Their price sensitivity table was posted at end of October, and only shows oil down to $70, and it's already dropped to $55.