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Magellan Midstream Partners LP Message Board

rrb1981 87 posts  |  Last Activity: Feb 7, 2016 9:01 AM Member since: Apr 18, 2001
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  • Reply to

    Linn reality

    by gpd8252 Feb 6, 2016 10:09 AM
    rrb1981 rrb1981 Feb 7, 2016 9:01 AM Flag

    Will you still be here when Linn files bankruptcy? :)

  • Reply to

    Linn reality

    by gpd8252 Feb 6, 2016 10:09 AM
    rrb1981 rrb1981 Feb 6, 2016 9:45 PM Flag

    Poor poor Norrishappy, still blaming our incompetent President for Linn's problems.

    I take great satisfaction in reminding him of our many discussions where I pointed out Linn's constantly falling DCF and their desperate attempts to shore it up by gobbling up assets, many of which were only marginally accretive.

    I'll stick around until they file Ch. 11 :)

    I wonder who is going to gobble up that nice collection of Hugoton assets.

  • rrb1981 by rrb1981 Feb 5, 2016 8:27 AM Flag

    I cant wait to hear norrishappy try to put a positive spin on this one or divert blame on someone else.

  • rrb1981 by rrb1981 Feb 3, 2016 4:20 PM Flag

    I bought back a portion of my holdings today at $22.40. I sold my MWE the day after the announcement, think it was at $69 could have been a little lower. Only good move I made in 2015! :(

    Market is overreacting to lowering of growth rate. I'll take a boring near 10% yield growing at 12% next year. I think post 2016 we can expect mid single digit growth (say 6%). A far cry from the promises a few months ago but the world has changed. The compliment of NGL systems that MWE has with the refined products network of MPLX makes for a somewhat odd but counter cyclical pairing. MPLX can better finance the growth.

    I will add more if it goes lower, and in this jittery market, it may plunge further.

  • Reply to

    Distribution Not Cut.

    by reading_tee_leaves Jan 30, 2016 4:40 PM
    rrb1981 rrb1981 Jan 31, 2016 7:37 PM Flag

    I've made this statement for a number of firms. A cut may not be "necessary", but the market wants resolution on funding. Kicking the can down the road is not acceptable. Look at Kinder Morgan. They did the preferred and it was laughed at.

    Crestwood should cut the distribution, utilize the cash to fund growth, deleverage, buy back units etc. The market always wins these battles.

  • rrb1981 by rrb1981 Jan 17, 2016 8:32 PM Flag

    Linn's bonds are now trading well under 20 cents on the dollar. In some cases, they are in the low 15's, with yields at astronomical heights.

    It's time for Linn management to cut the drilling budget, down to well under "maintenance" levels and find a way to retire notes. Another option may be to swap acreage and production with note holders.

    Looking fairly gloomy at present. Linn's abandoning of 5 year rolling hedges is literally killing them. Ellis and Rockov nearly singlehandedly drove this into the ditch. Granite Wash, Hogshooter, too much splash and not enough substance. Abandoning the boring, stable low decline assets in favor of being hybrid growth company failed miserably. Despite all of the slight of hand moves, divesting assets, making acquisitions, no amount of smoke and mirrors could hide the truth that high decline rates and lack of hedging could hide!

  • rrb1981 rrb1981 Jan 17, 2016 6:06 PM Flag

    The business isn't broken, the business model however is strained. MMLP's balance sheet is overextended.

    Coverage is tight and the capital markets are essentially closed. I cannot imagine them issuing equity at current prices nor debt, which would almost certainly make expansion projects impossible to finance. So, the base business is probably doing ok.

    A reduction in the distribution would give MMLP growth capital and allow them to help heal the bloated balance sheet. I do not think a drastic cut is needed (ala KMI), but a reduction puts them in better shape. Really it depends on when and to what extent the capital markets stabilize and recover. That potential recovery won't fix the balance sheet however.

  • Reply to

    30 by Spring

    by midwilguy Jan 14, 2016 3:47 PM
    rrb1981 rrb1981 Jan 16, 2016 4:35 PM Flag

    The only thing I would object to in your comment is the "low debt". Enterprise has allowed the balance sheet to creep to about a 4.4x debt/ebitda ratio. This is not as levered as Kinder Morgan (at 5.6 or 5.7x) but it is a far cry from the 3.0-3.5x range that was common place 5 years ago.

    I do not anticipate a cut at EPD.

  • Reply to

    The common sense

    by heya13 Dec 24, 2015 9:49 AM
    rrb1981 rrb1981 Dec 27, 2015 5:24 PM Flag

    Denbury's situation isn't great, but they are in better shape than many.

    It is clear, unless crude goes up significantly and soon, Denbury production is going to go into decline. However, this is not the end of the world. I know many companies have made comments like "we will come out of this stronger", which is highly unlikely, but I do believe those that come out of it will be much leaner in terms of operations. Every expenditure is getting scrutinized and I do believe that the industry is getting very lean.

    The latest debt exchange is an example of the levers management has to push the unsecured debt holders towards taking a haircut and moving up the ladder in terms of debtors. Energy XXI is a great example of a company that is doing an excellent job of reducing leverage.

  • Reply to


    by h92661 Dec 20, 2015 11:45 AM
    rrb1981 rrb1981 Dec 27, 2015 5:10 PM Flag


    Hamm made a huge gamble and lost, to the tune of $1 billion.

    Kudos for trying to put a positive spin on it though. I would point out that CLR has plenty of SCOOP and STACK acreage that is not in the Bakken and therefore is not midstream constrained. Of course, you know this.

    Hamm could have simply left the hedges in place and collected an additional $1 billion in cash, while still reducing growth expenditures.

    While Obama has been a complete disaster in every facet and unpredictable in his complicit cooperation with Iran (terrorists), it does not excuse management (Linn's or Continental's) from making poor decisions. I will be more than happy to "refresh" your memory on the many subtle changes to Linn's strategy, including abandoning their practice of layering on hedges going out 5+ years, the abandoning of buying mature, low decline properties in favor of being a splashy growth name (remember the "Hogshooter" and "Granite Wash" debacles?) and of course, failing to run with a meaningful coverage ratio.

  • Reply to


    by h92661 Dec 20, 2015 11:45 AM
    rrb1981 rrb1981 Dec 25, 2015 9:34 AM Flag

    The point remains norrishappy, that Hamm gambled away $1 billion by monetizing his hedges rather than showing discipline and holding them. As you may be aware, crude oil plummeted just a wee bit lower than when he monetized them. I know it's difficult for you to understand this concept, so perhaps you should borrow sandforbrains calculator and "try" to figure it out.

    Merry Christmas! :)

  • Reply to


    by h92661 Dec 20, 2015 11:45 AM
    rrb1981 rrb1981 Dec 25, 2015 9:29 AM Flag

    You missed the point. Hamm monetizing the hedges had nothing to do with his divorce. He could not get his hands on that cash, the hedges belong to CLR. He did monetize Hiland, which he owned outright.

  • rrb1981 rrb1981 Dec 23, 2015 8:55 AM Flag

    It isn't impossible, but highly improbable that KMI goes under. These guys are not insolvent, nor are they illiquid.

    Enron was a sham. Kinder Morgan owns real assets that generate real cash, not trading electrons. Those that want to draw a connection between Kinder and Enron are grasping at straws. It is really quite silly. Kinder's guilty of believing that his management team was so good that the capital markets would remain open to them even during tough times and with a less than stellar balance sheet. It's a mistake that he has paid for dearly, but I think will ultimately make KMI stronger.

    In 2016, they are projected to generate $5 billion (after maintenance capital and interest expense).

    The market simply does not "value" those assets as highly as when they were paying out 100% of the cash.

    The reality is that on an enterprise/ebitda basis, KMI is actually fairly cheap, especially compared to some peers like Enterprise.

    Kinder has answered all of the critics questions. They complained about the "complicated" structure, the incentive distribution rights being a burden and giving KMP a high cost of capital, so he rolled up KMP/KMR and EPB into KMI. He even got rid of the pesky K-1 by using the c-corp to do the roll-up rather than have KMP roll up KMI.

    Then critics said KMI still relied on external financing (it has for 18 years) to grow and the fear/contagion of low oil prices and low gas prices caused the credit and equity markets to lock up. So, Kinder cut the dividend and is now in essence, fully funding all growth from internally generated cash flow.

    What is not to like about being able to buy the same company at $15.32/share that was previously trading at $40/share, when the cash generating ability has perhaps declined by 5-10% year over year due to low commodity prices and volumes on some of their systems?

    And last, it appears they are finally going to address the balance sheet, which means the debt/ebitda may finally starting trending downward.

  • Reply to


    by h92661 Dec 20, 2015 11:45 AM
    rrb1981 rrb1981 Dec 23, 2015 8:23 AM Flag

    The divorce had nothing to do with monetizing the hedges. The hedges were owned by CLR. Hamm did divest his Hiland midstream holdings, which he owned directly and not by CLR.

    Monetizing the hedges was Hamm trying to be cute and time the market. CLR shareholders paid the price to the tune of $1 billion that he frittered away.

  • Reply to


    by h92661 Dec 20, 2015 11:45 AM
    rrb1981 rrb1981 Dec 23, 2015 8:20 AM Flag

    Yes, CLR has indeed scaled back their budget. In fact, it is likely they will see declining production in 2016. Hamm wasted what now amounts to about $1 billion due to monetizing his hedges rather than letting them protect cash flow.

    Oh, I noticed Linn bond still isn't at $40!

  • Reply to


    by blueflamedave Dec 18, 2015 3:28 PM
    rrb1981 rrb1981 Dec 20, 2015 9:49 PM Flag

    I think it could revisit the 8's and possibly the 7's.

    If it does, anyone buying will likely be very happy in a few years. Unlevered, holding a nice portfolio of royalties that are well managed.

    In the interim, I think this is subject to the whims of commodity prices and panic selling.

  • Reply to


    by h92661 Dec 20, 2015 11:45 AM
    rrb1981 rrb1981 Dec 20, 2015 6:13 PM Flag

    It occurred to me how fortunate Linn is that they have their hedges. It is in fact, the only thing that has kept them from bankruptcy.

    A good lesson for all of those that were calling for monetizing the hedges at much higher prices than present. Calling bottoms can be difficult. Ask the wildcatter Harold Hamm. How sheepish he must feel, watching CLR drop day after day, knowing he monetized CLR's hedges at much higher prices. Imagine how CLR shareholders must feel, knowing their esteemed CEO put their balance sheet and enterprise at risk by trying to time the market.

    Yes, a good lesson for management to learn. Balance sheet strength is important and should always be protected.

    While Linn will not be of interest to a buyer, certainly not the whole enterprise, CLR may find itself the target of a major should it continue to drop.

  • rrb1981 rrb1981 Dec 20, 2015 4:31 PM Flag

    Ebitda is projected to be 7.7 billion, DCF of $5 billion (this is cash flow after interest expense and maintenance capital).

  • Reply to

    The CEO bought

    by rob0864 Nov 20, 2015 3:54 PM
    rrb1981 rrb1981 Dec 20, 2015 4:00 PM Flag

    Actually more PAA units do mean more income to the GP, the IDRs are based on a per unit basis. Of course, this doesn't mean the DCF exists.

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