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UGI Corporation Message Board

rrb1981 55 posts  |  Last Activity: Aug 30, 2015 2:58 PM Member since: Apr 18, 2001
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  • Reply to

    Cost to OPEC of not cutting oil production

    by rperquy Aug 28, 2015 10:42 PM
    rrb1981 rrb1981 Aug 30, 2015 2:58 PM Flag

    We have demand growth to account for as well. It is possible this debacle rolls into 2017, but the point is that the hundreds of billions in cap ex cuts over the next 2-3 years will eventually result in a balance.

  • Reply to

    Cost to OPEC of not cutting oil production

    by rperquy Aug 28, 2015 10:42 PM
    rrb1981 rrb1981 Aug 30, 2015 2:56 PM Flag

    Exactly. The Saudi's are defending market share and the weak members in OPEC are in no position to cut, but I would not be surprised to see SA tell them they can cut if they wish to cut.

  • rrb1981 rrb1981 Aug 30, 2015 9:24 AM Flag

    Private equity is not interested in buying out Linn. Have you see the leverage? Rockov left the place in an absolute mess and with hedges for gas dropping 10% next year and oil hedges also rolling off next year..PE funds will probably instead focus on acquiring sr secure notes in hopes of coming out in control in a potential bankruptcy, which, I might add, isn't a foregone conclusion at this point.

    They may however be interested in buying select assets directly from Linn.

    In the meantime, LINE has become a leveraged proxy for crude oil price movements.

  • Reply to

    Cost to OPEC of not cutting oil production

    by rperquy Aug 28, 2015 10:42 PM
    rrb1981 rrb1981 Aug 29, 2015 2:47 PM Flag

    Alost zero chance of Saudi Arabia cutting. They might let other OPEC members cut, but the other members want SA to cut.

    Saudi Arabia is the low cost producer, no point in cutting. They are committed to shaking out the marginal producers.

  • rrb1981 by rrb1981 Aug 28, 2015 11:14 AM Flag

    Linn is setting up to be a nice levered proxy for crude oil prices over the next year.

    With deleveraging accomplished via negotiated purchase of notes at well under 50% of par, this is shaping up nicely to be a trading proxy for those that want to bet on a rebound in crude.

  • Reply to

    MCEP not participating in this little bump

    by herlod.glitch Aug 25, 2015 1:31 PM
    rrb1981 rrb1981 Aug 25, 2015 9:19 PM Flag

    MCEP needs to cut the distribution. That I worth $15 million on he borrowing base. Issuing preferred is ridiculous at this time.

    MCEP is in much better shape than many of the other E&P MLPs but they need to resolve the issue sooner rather than later.

  • rrb1981 rrb1981 Aug 24, 2015 10:27 PM Flag

    I had not heard that he made those comments.

    He was far too inexperienced to run an operation of that size.

    At current prices, I cannot imagine they have really any plays that give them as good a return as buying 7% notes at 43 cents on the dollar.

    The capital budget needs to halt and be reduced to under $100 million.

  • Reply to

    Distribution

    by rrb1981 Aug 18, 2015 9:37 PM
    rrb1981 rrb1981 Aug 24, 2015 10:19 PM Flag

    Cease the distribution now, use that cash to pay down the revolver faster, stay ahead of the banks and be proactive rather than reactive.

    I think MCEP can survive, but they need to deleverage as quickly as possible to withstand a lower for longer environment if it comes to that.

    The market isn't giving them any credit for the distribution anyway.

  • rrb1981 by rrb1981 Aug 24, 2015 9:51 PM Flag

    About 5 years too late.

    Ellis should be next.

    Linn's chance of survival is slim, but a resurgence in crude in late 2016 or early 2017 might give them breathing room.

    Notes trading at low 40 cents on the dollar range.

    They need to cease cap ex and devote that cash to delevering via note repurchases. Let production go into decline for a year, retire $2 billion of face value notes.

  • Reply to

    NG and why the product will remain cheap

    by robbyvanhalland Aug 23, 2015 6:27 PM
    rrb1981 rrb1981 Aug 23, 2015 8:37 PM Flag

    Actually it has already peaked, several months ago. Already down several hundred thousand bpd from the peak.

    You continue to let your ego get the best of you. It's what you do.

  • Reply to

    NG and why the product will remain cheap

    by robbyvanhalland Aug 23, 2015 6:27 PM
    rrb1981 rrb1981 Aug 23, 2015 8:01 PM Flag

    Read Genscape. They compare their projections to EIA. Genscape projecting crude production declines from a peak of 9.6 million bpd to 8.7 million bpd (this time next year).

    EIA numbers may not be perfect, but they are directionally fairly accurate with revisions following as more information is available.

    Genscape notes that US production decline began several months ago and will be even more evident over the next couple of months. It will still take quite a while for the market to come into equilibrium but US production is declining.

  • rrb1981 rrb1981 Aug 22, 2015 4:32 PM Flag

    I expect MMLP will build coverage rather than raise the distribution. In this environment, it doesn't make sense to grow the distribution as the market isn't giving them credit for the current distribution.

    The best thing they can do is go out and execute and deliver greater than 1.0x coverage for 4 or 5 Q's in a row before thinking about raising it.

    This malaise will eventually pass and crude will likely creep back up towards $60.

  • Reply to

    bigbear

    by jbcguy Aug 22, 2015 2:13 PM
    rrb1981 rrb1981 Aug 22, 2015 3:39 PM Flag

    Cohen is a shill. Always has been. He's also terrible at operations. He nose dived APL in the '08/'09 debacle, then layered on hedges at the worst possible time and was forced to divest crown jewel assets, then quietly handed the day to day stuff over to Eugene DuBay and disappeared back to ATLS. Rinse repeat. No doubt he is good and raising capital and finding ways to get his hands on other peoples money (Atlas Growth, the private drilling partnerships etc).

    There is no doubt whatsoever that Cohen is trying to salvage ATLS. He needs to get ARP unit price up high enough to divest the units and retire the debt or to keep paying distributions and let ATLS deleverage with that cash. That leaves him holding a stub with AGP, Lighthorse, Arc Logistics assets, none of which produce a significant amount of cash but might allow ATLS to stay solvent and Cohen to live another day. The whole Cohen empire (ATLS, ARP, REXI, RSO, RAS, and others) are meant solely as vehicles to pay large salaries to his family.

    The Rangely deal was horribly timed and they used far too much debt in order to goose accretion from previous deals.

    The Barnett Shale and San Juan assets are high quality gas assets and will generate cash flow. Removing Matt Jones was long overdue (lap dog, yes man) and putting Schumacher in charge is a huge improvement.

    I personally don't think ARP will survive but admit it will be entertaining to listen to Cohen deny reality.

  • Reply to

    Ellis on Linn

    by garrh Aug 20, 2015 11:00 AM
    rrb1981 rrb1981 Aug 20, 2015 10:41 PM Flag

    I wouldn't be so sure on 2018 oil prices being under $60 goskiing99.

    It appears quite gloomy at present, but note that already US production is predicted to be under 9 million bpd by year end, from a peak of 9.6 million bpd. And the fragile non middle east OPEC members are also suffering.

    Additionally, associated gas production is likely to taper off with reduced crude development. Mexico exports, LNG exports and chemical plants (crackers and polyethylene plants) will lift natural gas and ethane prices. Retirement of coal plants also will help firm gas prices, which currently look like a coiled spring, just waiting to pop in the next 12-18 months.

    I am not calling a bottom on crude, as it would be foolish to attempt such a thing, however, it is worth noting that LOE and SG&A for most producers make production below $20-$25 pointless. Oil companies margins are being squeezed and investment is being reduced. The sector cannot withstand much lower without investment being reduced completely by those that are either unhedged or those that are overleveraged. That reduction in investment will become evident in a few years, the same way the overinvestment from several years ago is being felt today. As an example, even world class and low cost operator EOG is focusing on just completing their inventory of drilled but uncompleted wells (DUCs). We may not be at the bottom for crude, but we are getting close.

    Linn's survival will hinge on how much debt they can retire and how much recovery they get in crude pricing..

  • Reply to

    Distribution

    by rrb1981 Aug 18, 2015 9:37 PM
    rrb1981 rrb1981 Aug 18, 2015 10:57 PM Flag

    I did look at it. The solid hedges run out soon. They even alluded to potentially cutting again on the conference call.

    The market isn't viewing it as sustainable with a 20%+ yield.

    MCEP isn't in terrible shape, but they do need to delever the balance sheet. Cutting would allow them to make some progress and when prices recover, they can reinstate.

  • Reply to

    The

    by wyatt_oil_2 Aug 18, 2015 6:39 PM
    rrb1981 rrb1981 Aug 18, 2015 9:58 PM Flag

    Kolja's margin call probably didn't help things either...

  • rrb1981 by rrb1981 Aug 18, 2015 9:37 PM Flag

    I think it would be prudent for MCEP to go ahead and cut the distribution to zero.

    MCEP could devote that cash to delivering and gain valuable breathing room on the revolver when it gets reset.

  • rrb1981 rrb1981 Aug 18, 2015 6:02 PM Flag

    I suspect that Linn will be directing as much discretionary capital as possible towards purchasing of notes at a discount.

    The 2021's are well under 50 cents on the dollar. The 2019's are trading at 50 cents on the dollar.

    The upcoming redetermination will be critical for Linn. Management projected $1 billion in capacity post redetermination. If that holds, look for Linn to pull down a large portion of that and use it to buy back notes. It is one of the few knobs Linn has to turn and if executed, and to what extent they repurchase, could result in significant interest expense reduction.

    They may also end up letting production slip into modest decline, diverting some of the $530 million towards note repurchases.

    I am still not convinced Linn will go bankrupt, but it will take skillful management of cash and the balance sheet and a nice uptick in commodity prices in 2017 for them survive.

  • Reply to

    Survival Mode

    by ronharv Aug 17, 2015 8:11 PM
    rrb1981 rrb1981 Aug 18, 2015 5:13 PM Flag

    Linn bond still not at $40...but Linn bonds trading at $.40 on the dollar.

    :)

  • Reply to

    Survival Mode

    by ronharv Aug 17, 2015 8:11 PM
    rrb1981 rrb1981 Aug 17, 2015 10:12 PM Flag

    Of course the market is efficient with random and usually brief spells of irrational exuberance and pessimism. The equity is priced at $3.00 unit, a full $.08 less than the distribution that sandforbrains predicted after the Berry merger. Of course sandforbrains was a degenerate math challenged huckster.

    And it is worth pointing out that the market is now pricing Linn's notes in the high 40's (yes, a greater than 50% discount to par). Linn's mismanagement of hedges post the Hedgeye fiasco and subsequent SEC inquiry has been nothing short of laughable and reflective of the fact that perhaps, the hockey kid got the best of Ellis and Rockov, even if he got the facts wrong. Of course, Kinder took care of business as he always has. A driven micromanager that loves what he does and puts his heart and soul into it. Ellis is no Kinder.

    Abandoning the use of puts and staying hedged out 5 yrs has cost them dearly. Nevertheless Ellis and Rockov continue to beat the drum, pretending they are brilliant operators when they are really nothing more than asset aggregators stringing disparate producing properties together at inflated prices and failing to protect the downside and margins. They are not value creators, but rather playing business with OPM. And of course, one cannot forget that Linn simply could never recover from the great hedges that protected them during the last crash. Try as they may, they were simply not able to plug the holes in DCF as those hedges ran off and were replaced with much lower hedges, evaporating massive amounts of DCF. The reckless behavior of Ellis and Rockov is amazing continuing to grow the distribution when their margins continued to compress year over year. Even more reckless than Harold Hamm blowing out his hedges (trying to call a bottom) and leaving CLR unprotected and leaving hundreds of millions on the table. The gunslinger mentality of Ellis has cost unit holders dearly.

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