This isn't really "breaking" news that the panhandle assets are going to be divested, but depending on the source, it may be a sign that consummation of the deal may not be too terribly far off. An auction rather than a direct sale is also interesting.
Worth noting is that Wolfcamp II is not mentioned as much. The company appears to still be drilling heavily in an attempt to delineate the acreage. This is looking more and more like a late '14 or '15 event.
Essentially more of the same, but now with a bit more clarity..
Company not drilling as much on their legacy acreage...target for the year was $22 million capital budget, at mid year they have spent $5.4 million. I suspect they will deploy that capital via an acquisition rather than via the drill-bit.
Sanchez deal isn't complete, but approval with Board of Managers seems like a lock, then unit holder vote. PostRock holdings down below 10% (likely much lower after today's volume). Unitholder approval needed to convert to GP/MLP...seems likely, though we will need to see how the IDRs are set up if they do have them.
Distributions...wow, management used the term distributions unprompted.
Recap coming in '15. Not much more was said on this. I assume that this likely means Sanchez drop down with equity, giving them a meaningful LP position.
Abella only one on the call...asked the same question about reducing leverage per reserves in order to boost borrowing base. It seems likely that a large equity recapitalization will resolve the problem...allowing the borrowing base to be boosted which will allow them to pay a decent distribution.
New name, symbol, logo and website...ok guys, the website is actually fine.
As for KMI/ATLS...Kinder always delivers...the Cohen's at Atlas (and RAS, RSO etc.) have a very long history of over-promising and under-delivering. Ed Cohen loves to hear himself talk, he thinks he is "smarter" than everyone else. He conveniently likes to forget how he nose-dived APL not hedging at the top, then hedging at the absolute bottom. One of the board main-stays can give more details as I did not really follow APL closely. Look at APL's distribution history compared to KMP, APL has cut multiple times, not so with KMP. ATLS does have the benefit of smaller size at APL and ARP to push growth up...but I trust Kinder far more than I would ever trust Cohen. Kinder also has a much better integrated network and better support staff. ATLS is cheap because you are in essence getting a discount because the market knows he will screw something up eventually.
Volume is at 1.5 million as we approach closing. I am hopeful that of that, PostRock is a significant amount. The sooner they are divested the better. It will be good for CEP to be rid of that dark cloud.
Meanwhile, our little gem is pushing $3.00.
Seems unnecessary and contrary to their stated intent. LNCO was created to give them "access" to the portion of the investment community that do not want to deal with a K-1.
Kinder's issue was high cost of capital (incentive distribution rights were well into 50/50 splits). Linn of course has no incentive distribution rights.
Well, looks like the first part is in the works. It sounds like a proposal will be brought to the board of managers to elect to convert to an limited partnership, presumably with Sanchez as the GP.
One would expect the rebranding to happen at that time.
Unfortunately no acquisition looks to have been made, however, liquids production was up nicely. It also sounds like they have curtailed growth capital. They may be planning to utilize that capital for an acquisition rather than by drilling.
And unfortunately, no initiation of a distribution, but again, the conversion to a limited partnership seems like it may lead to that eventually. At this point, it is probably better for CEP to hold onto their cash if they can continue to grow production effectively.
"Anyways, after all your babble about shales you think an MLP should add exploration assets? Wouldn't a EOR carbon sweep play make a great deal more sense? If Mr. Kinder woke up one day and decided to put back all the commodity price risk he has strived so hard to reduce or eliminate?"
You are very dense. I never advocated exploration. In fact, I stated that I doubted Kinder would ever be interested in EOG/Linn. However, I believe he would be interested in Denbury if he wanted to increase his exposure to EOR.
As for Jon Stewart, that is your man crush. I don't watch that garbage.
You clearly misunderstood Norris, as is so often the case. Again, for the umpteenth time, I said IF Kinder were interested in production he would not pursue something like EOG or LINE.
As for utilities, owning transmission lines is far different than being a generator. It is a sector that is ripe for investment.
As for sandforbrains. It was a social degenerate and the board is much better off with its mindless babbling and copy and paste. I do however miss making fun of itss finviz charts, that really was fun watching it get all wound up and spouting off like a hotheaded buffoon about things that it clearly had no understanding of. Of course, the board is much better off without it around.
Thanks gumbyisle. I appreciate your comments as well.
Look on the bright side, at least we aren't discussing ethanol on an E&P LLC board!
Sorry Norris, but you have once again gotten confused. I am not a Progressive. I do not support our President nor any of his objectives, most of which I view as anti-American and with the real intent of lowering America's world standing. So, you will have to address your Jon Stewart man crush issues to someone else as I do not watch his show.
You are nothing short of a liar. I have never once stated that Kinder would target producing assets. Not once, ever.
I stated that IF Kinder were interested in pursuing more exposure to production, he would likely target Denbury, with its very excellent CO2 supply, pipelines and of course, their numerous CO2 flood fields.
As for Jones Act tankers, the latest Buckeye Borco ruling is certainly quite interesting.
I can see why you looked up to sandforbrains so much. Both of you are of the same ilk. Degenerate pond #$%$.
As I've stated numerous times, never mess with Rich Kinder.
He will outwork and outsmart them. He buried Kurt Wulff years ago. Wulff is far smarter than the clowns at Hedgeye. He took Carol Coale to taks when she was, at I think Prudential, when she had the gall to tell Kinder, on the conference call no less, that KMI was a big utility. They never learn.
BTW, I never said local distribution assets. Once again that is you running wild with the facts. High voltage long haul transmission is preferable.
I cannot imagine Kinder ever wanting to enter local distribution again (gas or electric).
He had that exposure back in the late 90's that he inherited via KN Energy (when he merged his privately held GP into KN Energy and he and Bill Morgan took control and rebranded it as KMI). Kinder divested his local gas distribution business along with some merchant power plants that KN owned during his "back to basics" strategy. He also divested the gathering/processing assets as well.
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