Yes, you are losing out on immediate income. As I said, I am sitting on a minor capital loss and will simply take the ETP units. I've been investing in MLPs since 2000. I've been the beneficiary of many GP buy-outs. I haven't been right on every transaction and not every deal works out in my favor, but overall, I pleased to see RGP being rolled into ETP. The downturn in commodity prices was going to hurt the G&P side of RGP. We could have seen even more price deterioration and likely little to no distribution growth. RGP never managed to obtain an investment grade credit rating, which they had been trying to do for some time.
As you said, you can do other transactions to lessen the pain. At least RGP unit holders get equity in what is now the second largest MLP behind EPD.
I expect at least 4-5% distribution growth and perhaps we will be surprised as see 5-7%. Not much we can do about the terms, I suspect that they will receive enough votes to make it happen.
Overall the deal is ok for Regency holders. The "cut" in distribution stinks, but clearly ETP is a much stronger company that is far more diversified than RGP. The collapse in oil will hurt RGP. RGP has been trying to get to investment grade for years. They have some good things going for them, but clearly taking on PVR, which was a turn around play, didn't really help them. The Hoover and Eagle Rock deals are probably too early to really know. Their Haynesville lines aren't full and volumes have been dropping. Everyone knew RGP and ETP would merge one day. That day arrived. Distribution growth was likely to slow down to 2-3% a year in a low crude price environment. On the other hand, ETP will likely grow at 5-6% annually. ETP is getting RGP at the bottom, but RGP holders are getting equity in a much stronger enterprise.
I'm holding RGP at slightly higher than today's close. I'll gladly take the ETP and let it ride. I expect distribution growth at ETP to make up for the cut within 2 years.
As an owner of ETE, I view this as simply part of the roll-up.
Probably the typical increase of $.0125 quarterly ($.05 annualized).
Buckeye might actually see an uptick in storage of both crude and refined products. The recent Trafigura deal will be the main topic of discussion on the upcoming conference call.
Finally got a chance to listen to the conference call. Kinder continues to amaze. The roll-up of KMP, KMR and EPB into KMI were perfectly timed to coincide with what appears to be an excellent time to acquire midstream assets. America has been blessed to have such abundant oil and natural gas reserves and despite near term volatility, there is little doubt that these reserves will continue to be harvested for decades. Kinder will continue to play a large role in moving natural gas, crude oil, refined products etc.
The projection of surplus DCF for '15 is meaningfully above their original projection. Kinder has taken a page from the EPD playbook, which has been to run with "excessive" coverage, which in turn is used simply as equity growth capital and to provide an excellent cushion against unforeseen events. It is a pity that the slick talking Rockov did not operate Linn with said excessive coverage ratio. But, to coin an old Kinder phrase that he frequently used to say, "make sure you aren't drinking your own whiskey and smoking your own dope". It appears that Rockov was doing just that, ...getting high on his own supply.
The acquisition of Hiland is likely the first of many deals that Kinder will make now that he has a ultra-low cost of capital. Hiland will no doubt grow in value, especially with CLR acreage dedication. If you were going to bet on any Bakken player, it would be Continental. The fact that Kinder was able to catch Hamm in an inopportune time is fortuitous. I eagerly await to see one of Rockov's acquisitions. He finds himself leveraged to the hilt and with an equity cost of capital still well over 10%. Silly, simply silly for them to have so haphazardly abandoned their full hedge position to try and "time" the markets.
How divergent KMI and LINE have been since the clown at Hedgeye attacked the two enterprises.
It is indeed in the Form 4 (available on SEC.GOV).
I copied it below..
"Units sold involuntarily. These units were held as collateral for a loan and were sold as a result of a decline in the Issuer's unit price."
Regarding Rockov's sale, as Warren Buffett likes to state: It is only after the tide has gone out that you find out who has been skinny-dipping. It certainly seems like a margin sale type of transaction.
And in other news, looks like Rich Kinder managed to swoop in and catch Harold Hamm in a cash bind (thanks to his rather costly divorce), picking up Hiland Partners.
As is usually the case, Kinder is simply tucking in another quality asset that will no doubt become more valuable in a few years as crude supply/demand balance is restored and the current pricing malaise subsides and pricing returns to a point where the incremental marginal barrel of production can be produced profitably. Don't kid yourself, look at "real" crude production growth across the world, the US shale basins constitute the bulk of the production gainsand that was with 4+ years of $100 oil as a tailwind (not counting restoration of dormant production). The Saudi's are playing with fire, forcing Americans to speed up technological investments which will, reduce completion costs (drilling and frac'ing) increase expected ultimate recoveries. In the end, the world will benefit from plentiful supply.
Of interest will be any comments from storage operators such as BKEP, BPL etc on upcoming CC regarding terminal utilization for both crude and refined products. Cushing volumes are marching steadily upward and I expect BORCO is seeing comparable refined product inventory climb. Not everyone is hurting from surplus supply.