you are correct but getting from point A to point B where lower gold supply via lower production leads to higher prices is going to be a horribly awful affair. Without any hedges on gold, the miners are in for a scenario significantly worse than what faced NG producers last year. i think one has to consider the scenario of the dividend being cut in half to alleviate the near-term cash flow issues. ABX debt is trading worse by the day and at sub 1300 gold, there is trouble...hard to believe they are completely unhedged - so much for the extraordinary leverage to the gold price that ABX management use to tout
for a guy that has been sooo wrong and getting whoooped, you sure don't show any humility....the market gods frown on such behaviour you know....
RE: why do u suggest this is a stupid post? It raises a important and critical issue. Last Q, the DCF was $21.8mn but maintenance capex was only 13.6 vs the previous 4 quarter average of 18.6. I don't know if that is weather related but I would expect that number to bounce back unless there is another explanation that I missed. If there had been a "normal" maint. cap-ex, then DCF would have been only $16.8mn vs the distributions of 33.8 so only 50% coverage. Then there is the added question of whether one should include non-cash items like impairments ($5.2mn) and equity-based comp ($4.5mn). That is a personal choice but I do not like to add them back since they are and do affect distributions - maybe not today but surely tomorrow and they are PV'd. If one was to net that out, then true DCF was $7.1mn so basically no coverage. Going forward, the only logical choice (even with a wet-gas window sale, which won't amount to much ~150-200mn), is to raise EBITDA which implies more units for sale to fund drilling in their current assets or for an acquisition (stealth debt reduction). Alternatively, they could issue shares and just pay down debt but the market won't really enjoy that. My computations based on their guidance for '13, which is open to nit-picking, implies 5 mn new shares are needed. Hopefully, if i get to the conference next week, i will get them to discuss their financing needs more clearly.
that is pretty funny that you call the vesting of phantom units (equity based comp) as an "unusual item" like it wont happen again. Talk about bs. Also, maybe you can explain why maint capex was 5mn lower than the previous 4Q average. Is that "usual" going forward. I do not believe in netting out other non-cash items from DCF but will let it slide. The point of the post was that we should be discussing the fact that DCF coverage is well below 1 (close to 50% with my computation) which is unsustainable - the fact that u chose to nit-pik means you have your head in the ground and, btw, the hope was they could cut back on G&A a bit to support distribution but you've proven that wrong....why don;t you start a new thread with your brilliant ideas on how they are going to keep dividend stable
this is all well and good but I think the focus here should be how are they going to increase distributable cash flow to cover their distribution. Q1 did not look good, especially with (strange) low maint. capex. Their expenses are high (85c G&A per mcfe?) and need to come down in line with peers. This whole Utica mirage has masked a lot. Let the Utica chips fall where they will but they need to get production boosted and costs/debt down soon if not now.
you busting my chops because i stated the wrong conference call? Aren't you the same guy that tried to rip me one when i told u the oil window wouldnt pan out so quick and distribution growth would not come in 2013 H1? go listen to OGIS and then their CC and tell me the story line is the same
as for stretching it, how about this guy's line:
"The key takeaway here is that EVEP has someone willing to buy the bulk of their acreage at a price that is acceptable them. It's just a matter of the terms"
good luck with that one
From the CC in response to a question about taking Tusc off the table:
"And until we solve this issue and they evolve to volatile oil window on the consistency in the amount of flow from the volatile oil window I don't think that we are going to get the type of offer for our position there that's satisfactory"
Now at the OGIS conference I believe (will have to go listen again) he said that well rates in Tusc/stark were much better than initially reported. I will get you the exact quote when I have time but its in my notes
well i can't imagine we are going to see good news outside a few areas and certainly not in the oil window given JWs remarks...although I was surprised what he said when back on the Q1 CC he talked about Tusc wells being much better than initial rates...flip-flop....
the high volume day was at 52 so i assume u rounded to 30%. details details....APL was in the single digits during the financial crisis so I think there is a reason not to get shaken out (the whole market was cratering). Can't compare that to this - he could have easily stopped himself out - obviously a few did
1) Its good to know even the smart guy gets it wrong sometimes
2) That assumes he got in ~52, which was ~low of the quarter
3) That is a wild guess - APL was in single digits during financial crisis (beta effect not alpha)....there is not way to know what he still has on or options
That and oil&gas E&Ps (like LINE) that dig stuff out of the ground and sell it (although not in god-forsaken countries that rob you ex-post) and do not cover their dividends due to massive cap-ex needs trade at 8+% yields and yet this trades at 4%? Even utilities that have fairly safe divs with some, albeit not much, growth prospects trade higher in yield. Does anyone believe dividend is going to grow? And, if so, when?
I am looking at their balance sheet which, if u ask me, they overprice their probable, measured, indicated, and inferred reserves - if you use more realistic assessment of those, you would even have a lower book value....
well of course my thesis is slanted from the short side- that is what I believe...and you are on the other side and that is what makes a market....glty
first off, when u take out the goodwill premium that they overpaid for acquisitions and will get written off, book value is 12.5 $/share and then u have to knock off the 1.5 bn to be given to the Dominicans, and you are looking at 11 pps for book value.....no one in their right mind is going to buy ABX outright, let alone the shares......sorry but this is going down again probably to 15 or below
i would be...their bonds are finally taking a hit - '42s were at par not long ago, trading down to 94 today....the street did a good job distributing the recent paper but they sure not holding it in
the bigger issue is leverage and the need to add units. Of course, they won't say it until they have an "accretive" acquisition lined up but we all know it has to occur even if just to pay down debt and maintain distribution. The fact that they are not coming clean on that will hang over the pps. Even good news will get discounted - Im just glad I got a few other trades right this year
34 but why quibble....i think a secondary gets done in the 37 range, alleviating leverage concerns which will allow this to trade at a slight premium IMO although risk is lower not higher
yes, your #s are close enough...the bigger issue is getting leverage down. I see the leverage as follows (total / Senior secured). Note that they recently had covs changed to 3x senior secured from 4x total and it expires in Mar 2014 so one has to assume it reverts
No Sale at All: 5.1 / 3 (too close to covs implies a sale must occur)
18k acres at 10k per: 4.3 / 2.3 (buys you the breathing room but still need more)
add in 5m units at ~37ish: 3.6 / 1.5 (where you need to be)
so it seems all but obvious that we will have a substantial 11% increase in units outstanding to fuel EBITDA and get leverage right....
they will issue shares (sorry units) b 4 they cut the div - just like every other MLP....how do you get average E&P MLP as 10?, less than 9% is more like it unless u are counting royalty trusts or something.....EVEPs issues are their own making but they didn't overindulge like a lot of the high-yielders