i agree they will not reduce distribution but they will have to issue shares to fund it + big spend of $270mn in '14 according to their guidance. Their CFO basically stated they will be at the capital markets
their is little ebitda accretion until 2016. Also, Montana expansion is not costing $400 mn start in '16 vs previous guidance of $275mn cost start in 4Q15....they pretty much stated they will come to capital markets for big '14 spend of $270mn....
the implied crack spread from their sales and cost of sales was miserable down 38% from Q2 but, as u said, its the rear-view mirror. I expect that spread to rebound as market cracks are prob up about 25% this Q so far. But still, while they will be DCF +tive, they will only cover 60-70% (after GP). Coupled with the capital expenditure plans, i expect some new issuance this Q. They avoided a big drawdown on cash this Q by adjusting working capital (e.g., accounts payable up 40mn) and shareholder equity off 78mn due to lack of dist coverage. I do note they are reducing capex - i guess that is why montana expansion will not impact until 2016 now. I do not like paying GP IDRs of ~4mn a quarter when DCF is negative. Crack spreads will revert back to their '10/'11 levels (i do not see the blowout in '12 recurring), but I see about a significant share count increase as a necessary evil for growth in '16+ implying all dividends need to be reinvested to avoid dilution (all while paying the GP a handsome fee).
why doesn't anyone mention that new shares are going to need to be issued to fund the distribution over the next 6-8 quarters.......
those were not excercises - they were acquisitions, otherwise knoen as "gifts" to the board...how'd u like to get 5000 10-year call options struck at 5.56 for nodding your head..."KKR deal. Okay. Sounds good. Pass the donuts and where's my options!" Nice work if u can get it
yeah but back contracts were normally immune....they have been crashing
June '15 3.75
June '16 3.88
June '17 4
the export story, which gave the curve some slope is no longer having impact. EIA reporting increased nat gas even with minimum rig count, more ng coming from oil wells (not flaring it now that infrastructure is there - u can truck oil, not gas), and plays like marcellus where some operators can make $s even at $3...better hope for cold weather
he just recently supplied a $300mn term secured loan (thru '19) for the KKR deal instead of an equity raise...i don't think he wants any more unsecured risk...i don't think he is looking at it as dividend play
anyone who followed wilbur, let alone howard, has taken a bath....and u can't follow wilbur into the secured loan....
i do note that op CF was 87mn adj vs 110 on capex so net they are free cash flow -tive cause u can't live withoout the capex. then u have the 11mn in div payment....so div was funded out of debt - that can't go on forever...bottom line. we need $5 NG and bad
the split is 75/25 but XCO does not give KKR any cash flow (from the 1st year) until those wells are sold (at PV-10) which means that XCO will be using those $$$s to fund their drill cost over the first year. The way I see it then the package will be cash flow flat to slight +tive over year one, but then go -tive as XCO will have to buy those wells plus fund new drills. Now how this all gets accounted for is anyone's guess. I suspect KKRs $$$s owed will go into accounts payable (instead of debt)? and that the total $$$s will end up in EBITDA but then KKRs piece comes back out as capex...that is the only way I see this package growing ebitda o.w., its pretty much cash flow -tive until year 5 when KKR is totally bought out. Like I said, it seems like its buying oil at PV-10 with some funky accounting and financing thrown in.....
what an idiot..obvioiusly you missed the part of capex down another 1bn next year, cost cuts of 500mn, and better C1's.....keep dreaming...i guess if we trade down to 17.74, you will declare victory....sleep well