I too believe that the market is not differentiating gassy producers from oily producers. I believe the market is saturated with plenty of E&P MLPs. Consolidation such as BBEP and QRE should be viewed in a positive light. I wish MCEP, NSLP and LRE would get absorbed as well. The sector needs to contract to 5 or 6 large well run companies. Having weak players appears to impact the whole sector.
I think the whole sector needs to stop focusing on distribution growth and instead focus on stability.
Of course, I think the price of crude is driving the energy market. Even natural gas pipelines seem to go down when crude drops, which really isn't a shining example of an efficient market.
Actually Legacy looks like it is fairly well positioned. Their exposure on crude is no doubt a major concern, however the WPX deal has shifted their portfolio away from being so heavy on crude. Additionally, the lower than average leverage should give them the potential to make deals at the "bottom" of the market. I'd expect distribution growth to taper off, perhaps become stagnant, but I would not expect a distribution cut, unless crude really gets hammered.
First, I am anxious to see if it really is 1.20x..they claimed 1.10x once before only to report something like 1.07x. Of course, I guess we shouldn't complain even if it came in a 1.17x vs 1.20x..coverage well above 1.0x is good.
Next, we need to understand if that strong coverage is a result of a tranche of new wells being brought online recently.
Overall, I am pleased that they did not increase the distribution. I would much rather see them run a year or more focusing on maintaining coverage well above 1.0x with the surplus being reinvested back into the business.
Also looking forward to seeing the hedges.
It will be announced this week.
I'll venture a guess of no increase. Really wouldn't matter if they had increased it, the market would likely yawn.
I think these guys really need to stop worrying about growth. Focus solely on the highest capital efficient drilling projects. Any and all coverage ought to be put back into the business rather than distributed.
The question is what volume of hedges were layered on after the Rangely deal and at what price! I guess we will find out in the coming weeks. Until then, we should see a distribution announcement in the coming days.
It's really a fabulous holding. No leverage to speak of and nice exposure to both oil and gas plays, including the Bakken, Fayetteville and some Permian. Once the market malaise passes, DMLP should settle down. no doubt distributions may decline some, but DMLP remains a nice long term holding for income and appreciation.
You are correct, the strong are selling off with the weak. No doubt, these lower prices will wreak havoc on many overleveraged players. MEMP is well managed. I think the next year or two will be interesting to watch unfold. Another to watch is EVEP, which has a rapidly growing midstream segment, that may be monetized (like their holding in Cardinal). That would leave them with proceeds to redeploy when pricing is advantageous to them (blood in the streets).
It seems like they should announce today or tomorrow at the latest judging by historical dates, the 27th appears to be the latest in recent months.
Will be interesting to see what the "steady state" oil production values will be for Linn after all of the transactions are complete. Provided they can divest the remaining Wolfcamp production and acreage and assuming it is swapped for natural gas production, Linn will have materially reduced their exposure to crude oil prices in outlying years. Of course, distributable cash flow is really what everyone is concerned with and it remains to be seen if they are willing to depart with the final tranche of Wolfcamp production and acreage now with such a pessimistic view in the market for crude. They may be better served to simply hold onto that acreage and production and wait for sunnier days. The acreage is largely held by production, so development can wait.
I view this sell off as panic. I think it may take time for the fear to subside, but with coverage above 1.0x for 2015 it gives them plenty of time to continue to optimize and high grade the portfolio.
Am I reading the release correctly in that the Q1 '15 distribution is expected to be $.85/unit? That is a reduction from the current distributon $.9275. Seems a bit strange that such a petty reduction would be needed to close the ACMP merger.
100% hedged on oil as early as Q1....yes, and since then they have closed on both Rangely and the Eagle Ford deals which have added nearly 3,800 bbl/d of oil. Let us hope that they had the smarts to hedge at least 75-80% of that new volume at closing of the deals.
In essence I believe what you are saying is that in times of market panic, fundamentals of individual companies matter little to holders that are needing to unwind positions, especially holders utilizing leverage.
It also appears that regardless of the specific progress that Linn has made vis-a-vis the timely completion of the 1031 trades with ExxonMobil, Devon, Pioneer and the pending divestiture of the remaining Wolfcamp, the market has sold off Linn with the rest of the E&P producers. Even well hedged gas producers have been seemingly lumped into the same barrel as the oily names that sold off with the plunge in crude prices. Interestingly enough, I used that sell off to add some UPL which I find far more attractive at present pricing.
I am not sure how long the current malaise will last, but I feel quite confident that the purge of overleveraged holders will eventually run its course and the market will once again return to rationale pricing, especially for well hedged companies. What remains to be seen is what kind of risk-premium the market will assign.
Linn's latest moves "appear" to have accomplished what they have intended and broadcast, which was to shift the company back to being an operator of largely developed, mature oil and gas properties with a low to moderate decline that can be easily managed. We believe Linn's distribution is now fully covered and provided they continue to be quality operators that can manage field LOE/SG&A, it is likely protected through 2016 given the nice coverage they now have. Outlying years will become more clear as hedges are layered on and as organic growth and or acquisitions are effectuated.
The problem is that ATLS (post spin) will have a difficult time growing their distribution if ARP is unable to grow due to a costly equity.
What ARP needs to do is demonstrate multiple quarters of solid operational excellence and forget about trying to chase deals. As long as they can maintain a 1.0x coverage ratio without making deals, the market may reward them with a higher price than the present, which essentially reflects no confidence in the management team.
They really need to focus on improving the amount of funds they raise via the private drilling partnerships. A $100 million per year increase would do wonders for ARP.
ARP is likely to announce a very modest increase soon. I think they will try to achieve the $2.40 ($.20/month).
Personally, I would prefer after they reach $2.40 to focus on operations and building coverage rather than on growth. The market is not rewarding them for growing the distribution, so perhaps the market will show some favor if they focus on stability and security of the distribution and efficient operations.
Ideally, ATLS will drop the GP and remaining collection of assets (primarily Lightfoot, Arc Logistics Holdings and AGP) into ARP rather than spin it off as a stub.
An E&P MLP without IDRs would likely be viewed more favorably.
I agree in general. I think ARP can survive given their relatively nice gas hedge book. If you look, they have rising hedges going out about 3 or 4 year. Granted, the percentage hedged drops each year as well, but if they hedged at even current prices, the average price would be essentially flat for 3 or 4 years, meaning a relatively stable margin provided they can control LOE and SG&A, hence why I am interested in seeing them focus on operations.
On the oil side, I think they will suffer, but I believe what will really happen is that much of the accretion they had hoped for from Rangely and the EFS will be lost and instead, they will simply plod along with stagnant to low distribution growth. I am fine with that. Natural gas will recover in time as will crude, but as you said, it may take some time for supply/demand balances and geopolitical issues to resolve.
The Raton and Black Warrior assets gave them relatively low decline gas without exposure to NGLs.
I think ARP needs to focus on operations and shun deals for some time. Growing the distribution really shouldn't be a focus in 2015. Focusing on stability should...
You are delusional if you think the minority holders have any chance at PostRock. White Deer effectively controls PSTR and all decisions will be made to protect their interests. If they elect to convert their remaining preferred units, they will easily own 90%. At some point, they will likely just take it private, allowing them full access to PSTR's cash flow.
The writing was on the wall a long time ago when they brought White Deer into the fold. White Deer made a major blunder when they bought into PostRock, presumably thinking they were going to participate in a natural gas recovery. Instead, they sunk a lot of money into a zombie company.
Now, White Deer is trying to save their investment by converting the preferred into common, which will give them an overwhelming ownership stake. The company will free up a meaningful amount of cash flow, which can then be used to develop some of their more prospective oily PUDs. I think White Deer will do whatever it takes to "preserve" their investment. A reverse split seems likely to happen and perhaps they will convert the remaining tranche of their preferred stock into common giving them a greater than 75% holding.
It does depend on oil prices, on the development cost of the PUDs, the field LOE, hedges etc. Far too many moving pieces to accurately know for certain. In a macro sense, buying oil before it "collapsed" was not good. They would have been better off either not buying anything, or likely buying more mature natural gas production, where they can lock in $4/mcf going out quite a number of years securing a decent margin.