As for electrical generation, I think once again you prove how clueless you are. Our country is in dire need of major investments in our transmission assets.
In fact, it looks like PPL just made a proposal for major east coast infrastructure investment. It has been discussed numerous times at the annual NAPTP conference on seeking to get transmission assets qualified, which thus far, has been unsuccessful. The point is, Kinder's re-boot into a c-corp opens him up to many opportunities that in years past, he may not have entered.
Of course, we know Kinder is on the prowl for coal assets. They have spoken at length on some of the road shows last year about seeing the value. Buying at the bottom of the cycle is fantastic, especially when you have ultra low cost of capital. It puts KMI in a position to be capitalize on any recovery in the sector (post Obama silliness).
Your level of frustration rises each time I take you to the wood shed!
Your problem is that you've let your anger and hatred get the best of you, but then, that has been the case for years now since you got upset when I called out Linn for essentially living off their hedges and the fact that they faced huge compression in margins as high dollar hedges got rolled off the books and replaced with lower priced hedges.
As for the CO2 business, you're simply put, wrong. Kinder has continued to grow the CO2 flood business such that it has become an increasingly larger contributor to the business. The amount of cash flow that the flood portion of the business generates is simply amazing and a testament to Kinder's remarkable team. Kinder has SACROC, then he added Yates, then he added Katz, then he added Goldsmith. You can deny it all you want, but Kinder likes the CO2 flood business. I doubt seriously though they he would enter the typical conventional E&P sector.
I do however fully agree with your comment that the CO2 business does not get the respect it deserves from the street. While Kinder was frustrated about the discount that KMP got in part because of CO2, he made it very clear that he had no interest in divesting such a profitable entity (again answering your absurd comment about divesting it during the pending transforming transaction), especially when the market would not assign it the multiple that he felt was needed.
As for Buffett and his willingness to accept lumpy returns, I like how you try to spin yourself out of that hole, but sorry son, it didn't work. And as for Buffett books, yes, I read the Robert Hagstrom one, but I highly recommend Andy Kilpatrick's as well as Roger Lowenstein's, both excellent works.
As for sandforbrains, the board has not seen hide nor hair of that degenerate knuckle dragging Neanderthal for some time and the board is the better for it.
You are mistaken, as usual.
Buffett has commented at length about his ability and willingness to accept "lumpy" returns in his insurance business. He is quite content to underwrite policies and collect premiums knowing he will have years that are ugly because overall, his returns will be quite excellent as long as he maintains underwriting discipline. Having control of the float is also quite beneficial. Like Buffett, now with ample coverage, Kinder can accept higher volatility returns knowing "bad" years will not jeopardize the dividend.
As for your continued distortion of the facts, I never said KMI would seek out additional E&P assets. I simply answered that if Kinder did go after E&P assets, he would likely go after something that has far less execution risk than conventional drilling. Midstream has always been Kinder's bread and butter. It's part of why he left Enron. He has proven that he understands CO2 and can manage the volatility with hedging and his continued acquisition of fields that are excellent candidates for CO2 floods (Katz and Goldsmith) validate the statement.
Your assertion that it is becoming more and more like a take or pay is beyond absurd. Looking at slide 4 of the 2014 investor presentation on the CO2 segment shows the flood portion vs the S&T (supply/transportation) segment. Look at the graph of the growth of both portions of the business, then pull a sand and pretend like you never made the comment.
If Kinder does stray out of typical midstream, I suspect it will be in electrical transmission systems. They aren't MLP qualified, but clearly it is a segment that provides toll-like fees. With c-corp status, low cost of capital and strong coverage, the opportunities are significant and varied. It is also well known Kinder is looking to get into coal, so that too may be next. He and several other execs at roadshow presentations have made this comment numerous times over the past 18 months. It should be no surprise, he sees the value.
Less than $1/unit spread.
Finally getting a little convergence and will be quite interesting to see if we get divergence again (with LNCO rising above LINE). Not sure if this is them getting some positive goodwill compression of the spread thanks to Kinder or or if it is the buyback/offering or some combination.
As was pointed out, the announcement of the buy-back as well as shelf offering..allows Linn to simultaneously buy LNCO on the open market and sell LINE, pocketing a modest spread. I think the mere mention of the potential is enough to tighten the spread without the need for them to actually put it into action.
Still full of hatred I see and mostly interested in arguing for the sake of arguing rather than adding constructive comments to the board. How pathetic your life must truly be.
Now, to address you falsehoods. I never claimed EROC was a great deal. In fact, I stated it was interesting and that I was beginning to look at it more closely especially as the price plummeted. Joe Mills has always been a joke of a CEO which handicaps the company. He nose-dived the company twice, the first time selling off the crown jewel mineral royalty rights to Blackstone. The second time he had to sell off the very excellent panhandle midstream assets which they had assimilated over several years from multiple parties. While the system had been cobbled together, it was desired by multiple MLPs. Nevertheless, it does no harm in monitoring the value of EROCs assets vs what price Mr Market pays. I continue to monitor many issues. Of course, you like to distort because you are full of hatred an animosity.
As for what Kinder does or does not do regarding E&P, only time will tell. I simply answered the question that if Kinder WERE to add production assets, I do not believe it would be something along the lines of EOG or LINE as the poster asked. Rather, I believe he would be interested in something like Denbury at the right price because CO2 floods are a natural extension of the CO2 distribution business and because the returns are excellent, compensating for the higher risk. Kinder as you may or may not be aware, is a marvelous manager of risk. Further, his intent to operate with several hundred million in surplus coverage yearly also says his re-booted KMI can accommodate less predictable cash flow streams. Kinder, like Buffett has proven with his current CO2 assets that he is willing to accept "lumpy" returns when the overall average returns are much higher than normal midstream returns and when he can hedge oil production to help dampen the volatility.
To answer you question regarding whether KMI would be interested in EOG, LINE etc.
I believe if Kinder were to pursue the E&P side, he would go after Denbury Resources (DNR). It fits well with his current CO2 flood investments in SACROC, Yates, Katz fields, plus Denbury has their own CO2 supply plus they own much of the distribution pipelines (the ones that didn't get dropped into Genesis when DNR owned the GP).
Denbury in fact is entering the phase of high free cash generation, with a stated commitment of at least doubling the dividend from $.25 to $.50 and perhaps as high #$%$60/share next year. That is pushing close to 3.7% yield on present price and assuming the high end of $.60/share.
The re-booted KMI may very well trade at a 4% yield or lower upon consummation of the KMP/KMR/EPB deals (will be interesting to see where it indeed does shake out). It remains plausible that if Kinder is interested in increasing his exposure to the production side of the business, that Denbury would be one of the more attractive public c-corp E&P's in terms of low execution risk and strong free cash flow generation and if they can ring out enough free cash flow to make it accretive, I could see it happening.
While Kinder is a visionary and always thinking outside the box (KMR PIK creation as an example), I doubt we see him move into conventional E&P, it seems to be completely the opposite of what he has done for so long which is look for assets that throw off enormous amounts of cash with little or no execution risk. The CO2 floods have always been a natural extension of the CO2 distribution business, and one that has quietly been the growth engine at the company, consistently generating massive amounts of distributable cash, while also drawing scrutiny over the companies accounting of maintenance/growth capital in the biz.
One area that I believe he may enter that is not "MLP qualified" is electrical distribution transmission lines. Just a guess..
I think Greg Armstrong (CEO of Plains All America) succinctly pointed out several years ago during one of their conference calls that there is a huge difference between well integrated MLPs and "asset aggregators". Enterprise, Plains, Magellan, Oneok, Kinder Morgan are integrated, though one might also call Kinder Morgan an asset aggregator as it has a very diverse asset mix, some of which are not necessarily complementary (CO2 and shipping, natural gas pipelines, steel loading terminals) however, Kinder does optimize his system very well. EPD, MMP and PAA have to be considered some of the best at finding ways to capture incremental margin by driving molecules (crude, NGLs, natural gas) through their system. From gathering, processing, storage, delivery etc. Kinder, now that they are "one" will be on that list. KMI now has what amounts to a nearly full suite of offerings for natural gas, crude and to a lesser extent NGLs (needs a strong processing/fractionating presence).
I've always believed Kinder and Duncan were the 2 visionaries in the field. Duncan clearly "one-upped" Kinder when he initially gave back half of the IDRs (top tier at 25% rather than 50%) and he took it one step further with the vision to remove them completely by merging EPE/EPD. Kinder of course if probably the best operator (micro-manager) of any executive in the sector pushing his people very hard and demanding nothing but the best (look at the MASSIVE turn over in VP's at Kinder Morgan over the past 10 years!). Duncan on the other hand, went out and hired the best that could be found. In the end, both models worked well.
As a large owner of EPD and KMI with smaller holdings in KMP/EPB (much smaller than the KMI position unfortunately!) I'm pleased to see the roll-up. The release by the Treasury (IRS) regarding MLPs and revenue loss is troubling. Kinder is now a c-corp, so unless he re-spins..that is something KMI holders won't have to worry about. The US doesn't need a Canada trust repeat
The IDRs were a huge burden. It was obvious that distribution growth lagged. The IDR load per unit was nearly equal to the distribution. I suspect Kinder finally got tired of seeing EPD able to hold back well over $1 billion annually to fund growth projects and also have a superb low cost of equity capital to go along with it. This deal should give Kinder a currency that should make growth easier.
The conversion to a c-corp rather than the more typical GP being absorbed into the LP is an interesting twist and will no doubt give analysts plenty to chew on tonight and in the morning.
This is a very interesting deal.
I think everyone knew that something would eventually happen with the Kinder Morgan family of companies, as is also likely with Energy Transfer (ETP,ETE, RGP,SXL and soon to add Susser) and as has already happened with Enterprise (EPD, EPE, DEP, TPP)...but I think most were expecting a merger of EPB into KMP and perhaps some sort of restructuring of the IDRs..but a total roll-up is a further nod to the creativity and drive of Kinder!
I own KMI, so will be interesting to see how this shakes out in the morning. Already sitting on a nice gain (thanks Kaiser) and now it looks like dividend growth rates will benefit...
I think the market Is simply assigning a Cohen discount. Most of the deals they have made have been pretty good, though the EP deal still looks like an albatross. I think that the low equity price will simply force them to focus on operations, which is likely needed. Cohen's weakness has always been his hyper focus on "deals". He cannot stand status quo. He must be working on something, regardless of whether or not it is beneficial. Day to day operations bore him silly. Perhaps this is what they really need. The market will finally see if ARP can maintain DCF above 1.0x without constant acquisitions. If their maintenance capital is sufficient, then absent acquisitions, they ought to be able to sustain the distribution.
They spoke of their operating teams working on low cost, capital efficient projects to keep production flat. We shall see if that is enough or if they must resort to small deals financed with debt.
I should also say that I fully expect that the upcoming conference call will bring news of the long awaited GP sponsorship being formalized. We might also get news of an acquisition from Sanchez. I'm also mildly optimistic that we may see the initiation of a distribution, perhaps something along the lines of $.04/unit annually ($.01/unit quarterly)
You are correct. I see an 8-K was posted Thursday. I typically check every 2 weeks.
PostRock is making excellent progress in divesting their holdings. They seem like they are on track to be nearly divested by YE, though the PSTR 10-Q states they are looking to be out within 6-9 months.
As for the share price increase in the face of such a strong seller, yes, I think the market is quietly recognizing that the Sanchez relationship could turn out to be materially beneficial.
Indeed, the AMT comment was...amusing. Suspect he might have been thinking UBTI (or perhaps even just the K-1)...but your comment remains accurate, the number of "tax experts" that show up on these boards is simply stunning. 95% of them of course are simply disseminating what they read on some other board..which itself is typically of base!
Based on PostRock quarterly report, as of July 31st, PSTR listed CEP unit count at a little over 3.1 million, meaning a divestiture of around 200K units from the 21st to the 31st. As we've had several days of strong volume these past couple of weeks, it looks like PSTR is indeed likely under 3 million units. They did however state that they were looking to exit the position over the next 6-9 months, which puts them in early '16 before being completely out. Not a big deal, but clearly the sooner they get out the better.
As surprising as it may be, your comments are worth less than those of sandforbrains, and his were nothing more than the mindless chants of a lunatic.
"That said management is looking to get the unit price up and so the cost of equity down. Then use LNCO to buy up a low leverage c-corp. Which avoids the insanity of using extremely high cost issued or retained cash flow to directly reduce leverage."
I like how you eventually get back to recognizing that Linn's balance sheet and leverage is higher than is desirable despite denying it repeatedly. You have an excellent career in politics awaiting you.
Linn is trying to run with a debt/ebitda ratio (oh, you know, that metric that sandforbrains denied even existing before he got his %&# handed to him) that is more suited for a midstream. The rest of the E&P MLP sector is running with 3.0x and Linn is running with well over 4.0x...ha ha...but clearly you recognize that using LNCO to acquire an underlevered c-corp is needed to get the balance sheet back in order..which is precisely what I said was the second step in the turn around of Linn. Achieving coverage above 1.0x and addressing the untenable high decline was #1, now addressing leverage is #2. Deny it all you like, but you aren't fooling anyone. Never have. Never will.
I never said the California operations were declining. I said they were steam assisted, which is indeed a recognized tertiary recovery method.
More fabrications. You have proven that there is no level that you will not sink to. You are as much of a low life as the degenerate sandforbrains.
You have taken exception to Linn's bloated balance sheet every time it has been pointed out. It is obvious that you cannot handle the truth and are still very ticked that Linn bond isn't at $40. You can be snarky all you wish, but you and I and others here all understand the implications of the '16 natural gas swap shortfall and the hole it will make. Strong coverage ratio is a very easy know for them to turn. If you are relying on the market price to recover so you can issue higher priced equity, then you have proven that the model isn't sustainable without market cooperation. And there is a big difference in having cheap equity to grow versus needing cheap equity to maintain. Linn's maintenance capital ought to be sufficient to keep cash flow/production/reserves flat without the need for outside equity.
Oh, I notice Linn bond still isn't at $40 despite your desperate pleas and spin.
Ha...you're still upset about the fact that Linn could not manage the high decline rates with their unpredictable drilling program.
It doesn't matter though, Linn saw the light, abandoned the hybrid model is back to the original business model.
Sorry, as far as my politics are concerned, I am not a progressive or a liberal. Didn't vote for the clown in office and don't support his anti-American policies.
With that being said, your life must be completely miserable. You complain non-stop about our national situation, which I fully agree is messed up, but I do not let it ruin my life.
Meanwhile, enjoying my monthly distributions from Linn bond.
Oh, have you seen the social degenerate sandforbrains lately?
It is a great report. It clears most concerns thru '16 and clearly more progress will be made this year, in '15 and '16.
Now they simply need to execute. The pressure of having to deliver on the drilling side is largely removed with the addition of Hugoton, they have plenty of drilling opportunities (low risk, low cost) as well as the plentiful high IRR oily PUDs held within the Berry portfolio.
A very solid report.
Street should be very pleased. Surplus coverage of $103 million for '14. That is over 1.10x (331 million units outstanding @ $2.90/unit). This coverage will cover the '16 natural gas shortfall (presently a $1.00/mcf reduction on the swaps on 300,000 mcf/d, or a little over $100 million annually).
Nice to see an update on maintenance capital reduction of $300-$400 million.
Also nice to see pro forma decline rate of 15%. A very nice reduction from the untenable 35% from several years ago. Company is finally returning to tried and true formula. Now back to the rinse and repeat strategy of buying mature, high PDP, stable, low decline properties, hedging them out 4-5 years and being an operating company rather than a hybrid driller.
I added some LNCO today.