I laughed when he said employee sickness. Ummm, you mean the sole trustee?
When someone tries to pass themselves off as an authority and says that production shortfall was from a dull drill bit, employee sickness or broken tools, I thought I was going to fall out of my chair.
Ummm, I guess since HGT's conveyance covers literally thousands of wells, that must be a lot of broken tools, sick employees and dull drill bits wouldn't even enter the picture..there is "minimal" drilling going on as evidenced by the paltry development capital calls.
I'd be careful with simple thinking like that. Look at DOM and MTR for (2) trusts that are dangerously small in my opinion. They generate $4 million give or take annually
A 4 state area is irrelevant. It has to do with the underlying production and the commodity prices.
Being vertically integrated doesn't seem to have hurt Enterprise Products Partners too terribly much :)
I think PDH would be aided significantly if they were to move towards fractionation to better control their propane supply costs. To be honest, Olefins production seems like it would dovetail nicely along with PDH being their primary line of business.
One might even argue that a propane export terminal would be a natural hedge as well though I doubt we see that from PDH.
Agree, the IDRs via ATLS are the way to play the growth story. In the interim though, ATLS might be dead money if ARP cannot grow aggressively and if APL is also in a holding pattern.
I view ARP as the short term value play. I own plenty of GP's (mostly all midstream including c-corps and LPs), including some Atlas (ATLS). I also own some ARP.
The real issue at ATLS is that they cannot seem to get APL or ARP on track.
ARP was doing ok for a while, but now appears to be the highest yielding E&P MLP (aside from LRE). Not good. It clearly does not deserve a low yield like a Legacy but 11% seems a bit steep, especially when you look at the hedge book and see that the average prices are generally trending upward over the next few years, albeit modestly. Same could be said about the fact that they have oil volumes that tend to be generally speaking, trending higher Q over Q. The private drilling partnership biz has been in the dumps for 2 years, but still producing $40+ million annually.
Worth noting, Vanguard mentioned also creating a "side-cart" drilling company to help consume PUDs. I think this is essentially what ATLS is working on creating. It would help ARP make acquisitions that have high PUD components. Will see how this unfolds.
Exactly. It always makes me chuckle that someone would think they found a yield above 100% that wasn't distressed..
This is essentially a 13% yielder when you back the cash reserves back into the equation.
While the Hugoton basin is pretty much dead, the arbitration has this thing mispriced in my opinion. I think they will lose the appeal and will have to repay (or rather, XTO will recoup). That will be a 6-8 month event.
Then, HGT ought to trade on the NPV of a slowly declining production stream and track the strip prices more closely.
It's a nice call on gas prices in my opinion. I'll be hoping to pick up a lot well below $7 if/when they announce arbitration ruling.
The stock is technically "dead"
At current valuation, it is cheap. Yield is 11%. While it certainly can go lower, it seems like value hunters, and what looks like a nearing resolution to Linn's debacle might help the whole sector.
I think we will have to get clarity on the conference call.
Items of importance remain the private drilling raise, the success and daily run rate of oil production across the company but also in respective basins such as Marble Falls and Mississippi Lime and to a lesser extent, Utica.
Would be nice to see additional hedges layered on for both EP deal, but also production growth (Marcellus, Utica etc).
I guess long term for me, I am most curious in seeing if oil volumes are pushing 2000 bpd levels. I think the high returning Marble Falls will continue to be one of the growth drivers for the company and frankly, ought to be the highest returning play in their portfolio.
Arbitration should be wrapping up soon. At that point, I think a negative ruling is likely a good time to jump in if the price drops significantly. At current prices, you would have to sit out meaningful distributions for 6-7 months...
In most cases I would agree, but in the case of PDH, I think with a single plant, being a variable payer with commodity price exposure on both ends of the spectrum, they would be well served to have some related assets such as fractionation capacity at Mt Belvieu, or midstream operations. It would obviously make a lot more sense if their were some synergies, but clearly the risk of having all of your operating assets at one location is significant and real.
It is painfully obvious that you have no clue what you are talking about.
First, this is a royalty trust. It has no employees. It has a trustee. The operations are handled by XTO (a subsidiary of ExxonMobil).
The annualized distribution is roughly 13%. They pay a monthly distribution (not a dividend) that is paid on cash receipts from gas sales within their royalty holdings (primarily in the Hugoton Basin).
"dull drill bit"...ummm, your a bit dull yourself..
I think the ARP debacle will hurt ATLS a lot more than people realize.
ARP was supposed to be at $2.60, instead they are at $2.24. That's a huge miss. It also hurts the leverage significantly at ATLS. High splits at $2.40. A $2.60 distribution would have meant another$.27/unit of IDR take, on 67 million units, or $18 million to ATLS, plus the LP distributions.
Instead, we are at $.56 with APPROXIMATE 1.0x coverage, which is Cohen speak, means 1.06x
It is going to take several years for ARP to get out of this rut. I think they have to get a much better equity price before they can make accretive deals. Otherwise, they must grow organically, and we all know how long that will take.
To rehash what I said on Sept 6, 2013
"Mills isn't intelligent enough to understand the E&P MLP concept. He drove EROC into the ground about 4 years ago and had to jettison the crown jewel (royalty portfolio) to a related party at a sweetheart price in order to keep himself in charge. He's a shill. He'll destroy EROC again."
Now, he just cut the distribution by 32%
Good job Joe Mills. It seems that you haven't learned much of anything from your previous disaster.
With that being said, if it drops below $6.00, it might actually be worth looking at as a speculative buy.but one must remember, your are trusting your capital in the hands of a Joe Mills, a man that couldn't drive hot nails into a snow bank with a 50 lb sledgehammer...
What was missing from the report was a look back on Q1 and Q2 numbers using the "new" DCF methodology. Would those .9x coverage numbers suddenly become 1.0x. I think most here understand that this 1.0x coverage is courtesy of the new formula more than improved performance. Should unit holders be excited about moving the goal posts? No, but chalk up a "W" for management for finding an out. Hats off.
Otherwise, it looks like management delivered on what they stated in 2Q, which was higher volumes but lower value commodity mix. Ethane rejection still an issue.
Berry deal looking less likely to happen at 1.25x ratio. I refuse to count it out, because I understand how crucial the Berry deal and the arbitrage is to Linn cleaning up its balance sheet. You can bet management will jump through any hoops necessary to attempt to complete the deal.
I think Berry's comment was a shot across the bow. Get your act together or we are looking for another suitor..
I think the answer is somewhere in between. Linn just made a Permian deal that by all accounts should be very accretive because it was financed on the revolver. If it had been financed with equity and long term debt, like most of their deals, it would have been marginally accretive, owing in large part to the low equity price resulting in a very high yield.
That being said, that deal should go a long ways towards helping close the gap (provided nothing else has gone wrong!). Remember they were at .9x coverage in 2Q and 3Q.
Clearly they cannot continue bloating the balance sheet doing deals on the revolver.
So, the other very important point that few seem to be focused on is that Linn now has, between LINE and LNCO, around 270 million units. On a $2.90 distribution, it requires $39 million in accretive cash to achieve 5% distribution growth. Folks, that is $39 million AFTER financing costs. Then throw in coverage ratio and maintenance cap ex!
These guys have become very large and it is straining their ability to deploy capital efficiently. We've seen the disasters in the GW and Hogshooter (that funny word again!).
Does anyone think that 5% year over year distribution growth is sustainable for Linn. Take a look at it if the Berry deal closes!
Producers will be making money hand over fist at $80 on existing production. Lifting costs in the Permian are relatively low. No more than $30/bbl for even the inefficient operators. The article notes economics may be stressed on new wells. This is a huge difference. As we have seen with most plays, tighter margins force producers and drilling companies to improve completion techniques, go to pad drilling, improve drilling efficiencies, reduce drilling times, develop better fracing methods etc.
It sure feels like a bubble could be forming in oil, but not sure the bursting of any bubble will drop oil much lower than $80 but of course, we have an economy that is being held up by a printing press so clearly anything is possible and highlights the importance of hedging.
Besides, I don't think Linn is interested in buying non PDP acreage. They want PDP with some PUD upside. A drop will not be terribly detrimental on existing hedged production.
Acquisitions will be a function of the prevailing strip price at the time. Whether sellers will be willing to sell remains to be seen. But clearly, selling existing production while prices are high is registering on some peoples radar. Look at UPL's latest acquisition in the Uinita. Actually looks favorable for both buyer and seller. UPL claims full payback in 5 yrs with a nice long life of low decline cash flowing production. Will be interesting to see if UPL layers on hedges to protect their cash flow (debt financed transaction).
New drilling will be challenged as prices drop, and of course, Linn has shifted a lot of its focus on growth drilling rather than maintenance drilling. This could hurt, but again, oil is presently at $97. You have to go out about 5 years on the futures market to find $80/bbl oil. This likely won't be an issue for Linn for at least a few more years given their hedge book? Anyone betting against consumption growth in China and India?
Yes, the hedges would look good, but it wouldn't really result in more DCF/unit. They'd even recognize mark to market gains, but we all know about that...
It would hinder profitability on any future incremental production that isn't already hedged (production growth).