The market appears to be puking on anything midstream. Looks a lot like 2008. Selling begets selling as leveraged players get margin calls. Anything and everything gets sold off.
Clearly some of the midstream firms are hurting, Buckeye isn't immune, but they do have a large exposure to refined products, which have generally tended to be relatively stable. Overall refined product use in the US has dropped over the past few years. BPL's recent acquisitions appear to be performing ok. It seems like it typically takes BPL 2 years to fully integrate and start getting accretion.
I look for BPL to keep plodding along, irrespective of the malaise. Low oil prices are going to be a pain for 6 more months and perhaps into 2016. $50 is below the long term sustainable price. It's ugly, but the market will muddle through it.
The Trafigura deal will be interesting. I expect it will start contributing within a Q or 2. Eagle Ford appears to be one of the lower cost basins with steady supply, though it may be flattening off some.
This upcoming call will be interesting. EPD's coverage ratio will likely drop significantly, but I expect it will continue to be above 1.0x
I am still at shock that EPD did not make a move for Markwest. It seems like such an odd pairing with MPLX. It makes sense for MPLX holders, or rather MPC but not so much for MWE.
Yes, Plains (PAA), Magellan, (MMP), Enterprise (EPD), Holly (HEP) all have some nice streaks to go with Genesis.
Nice to see Genesis up the last couple of days in a brutal energy sector sell off!
I think perhaps someone realizes how good of a deal this was with Enterprise.
DNR is a target because they are relatively small, they have low exploration risk due to them being a tertiary recovery focused company and while they are hurting, they are not insolvent. Denbury still produces good cash flow, they can maintain production flat for several years without borrowing (staying within cash flow, even under cash flow). A company could acquire them now, near the bottom and end up with an option on rising oil prices.
Based on what little data was released in the 8-K, it looks like this deal was made at 7.5x Ebitda, which is quite good, especially for quality assets. Their is clearly some volume risk, but these are world class assets that Enterprise built out and acquired over many years. I think EPD simply wants out of the offshore risk, especially considering it is 3% of gross margin for the entire company. They are a good fit with Genesis and it should drive another 2+ years of 10% distribution growth.
This makes Genesis a major player in the GoM. I had wondered why GEL didn't acquire the assets that CORR just acquired from EXXI, but it appears they were likely working on this deal.
Genesis doesn't get a lot of attention, they do very few roadshow presentations, but they are one of the more consistent MLPs, quietly cranking out ever rising distributions.
It's a major haircut on the distribution. By my math, and you have to assume distribution growth rates, it takes around 4 years to catch up. If you roll the token cash payment back into units, you are taking a little under a 50% clip on distribution rate (someone double check my early morning math, please!). Assuming 25% distribution growth rate at MPLX vs say 6-7% at MWE, you are looking at 4-5 years. Of course, in theory, with a high growth equity, you should get a lot of capital appreciation at MPLX.
On the whole, it looks like a great deal for MPLX, which uses an inflated equity to buy a great enterprise without taking on much debt and gives them plenty of growth for years to come. MWE holders do not appear to be getting compensated for future growth.
I don't think calling Magellan a POS is in order. They are one of the better run MLPs. While the unit price has suffered, management has been excellent, almost always under-promising and over delivering.
The Greek contagion, the threat of rising interest rates are taking their toll.
BPL is a relatively low risk MLP. They overpaid when they bought back the GP and that hindered growth for a number of years. From an asset mix standpoint, they have a nice mix of quality pipelines and storage terminals. Revenue and cash flow does not appear to be severely impacted by the drop in crude prices.
I think they have projected a relatively weak 2nd and 3rd Q but a strong 4th Q and full coverage for 2015. The recent Trafigura deal will likely result in modest growth in '16 and '17 and perhaps tempered by recent rate settlements.
Management seems to have done a decent job of integrating recent acquisitions into the mix.
Ultimately, I see BPL being acquired and rolled into another MLP.
This is a general market panic. EPD isn't immune to the sell-off, but they are somewhat insulated due to a strong coverage ratio that will help them weather the storm as well as any other midstream firm. I expect coverage to drop, but to stay solidly above 1.0x, allowing them to continue to fund expansions with surplus DCF.
They may even use this malaise as an opportunity to make a run at someone like Markwest, which would fold in nicely and give them a solid footprint in the Marcellus/Utica, where they presently are not the dominant player.
EPD is one of the more solid MLPs in the sector. They are not one of the fastest growers, but keep in mind, it is difficult to grow an asset base as large as theirs.
The lack of a IDRs, the strong capitalization and decent back-log of projects means EPD will likely continue kicking out those half cent increases for some time. No, it isn't earth shattering, but they do add up, on a compounded basis, you are looking at over 5% annually.
EPD has some of the premier US NGL assets. Even a combination of some of their competitors, say MWE, OKS and NGLS would be hard pressed to replicate their integrated system.
This downturn is more about Greek fear and interest rates than anything else.