Seems like a reasonable guess considering the movement in propane and propylene this Q.
Will be interesting to see if they give any updates on potential 2nd PDH unit.
If they do build a second one, let's hope it is a more fee based structure (ala EPD). That might help dampen the swings a bit and make it a more attractive investment.
Agreed. I'd say RGP has been the bigger disappointment. ETE is the GP. They have been working for several years to turn RGP around. They are striving for an investment grade credit rating. They have really done a good job of helping RGP out of the pit it was in, but truthfully, I expected ETE to assist RGP more than they have. ETE has not really used RGP as a growth vehicle. Granted, I think it speaks volumes as to how bad off RGP was being so dependent on Haynesville volumes and now they are exposed to Permian and Eagle Ford volumes, plus fractionation assets at Mt. Belvieu etc. Greatly diversified and PVR adds Marcellus exposure.
Long term we are waiting on ETP to pull them into the fold.
This PVR deal is investing in future growth, but it will take 2-3 years to really materialize. Meanwhile, we diluted our Eagle Ford exposure that was finally coming online...
We should be getting very close to a resolution. At current pricing, I believe HGT has "baked" in at least a good portion of an unfavorable outcome. Despite that, I suspect any negative ruling allowing full recovery will result in a large, albeit temporary drop.
If you factor in the legal reserves, we should be at $.078/unit/month or $.94/unit annualized or ~13%
So, you are receiving a considerably better return to accept that risk, versus buying something like SJT, CRT, PBT, MTR etc.
I wouldn't bet the ranch, but I think at these prices, it is getting very interesting, especially with so few real bargains in the market.
I'd look to add a little below $7 and then load the boat after the news is announced, good or bad. If they allow recovery, you get a marginal distribution for 6-7 months and then back to normal...
Nice, another half cent per quarter increase.
Slow and steady wins the game.
As I have said before, Legacy might not be the fastest grower, or the splashiest company around, but they consistently deliver steady results.
I'm actually pleased to see them raise the distribution slowly rather than boost it significantly and hope to be able to sustain it.
Oil prices appear to be dropping and may fall back into the $90's but Legacy' hedges should mostly insulate it.
We are suffering punishment for missing projection on distribution.
And one must remember, that $2.60 projection was before the EP deal.
I think we are probably nearing a bottom. It is becoming quite cheap. Even if they never raise the distribution again it is fairly cheap on a NAV basis.
On the bright side, the gas hedges appear to be climbing over the next few years. I think we are back into a wait and see mode. Hopefully coverage is above 1.0x
Still some potential for good news in Marble Falls results (oil production climbing, even if it is offset by falling netbacks on gas due to Pennsylvania disruptions.
Private drilling fund raise results ought to be released too. $125 to $150 million is expectation to maintain last few years. Anything above $150 million is a positive.
Overall though, the distribution projection shortfall is terrible for management credibility. It will take a few good or even excellent quarters to erase that shortfall. Collect distributions and hope for better days...
Agreed, an equity price under $23 likely precludes ARP from making accretive deals. This in turn forces management to focus on operations (are you listening Ed?).
Of course, as soon as we go above $23 you know Ed will be anxious to do a deal...like a little kid with ants in his pants.
Hmmm, perhaps a low equity price is just what ARP needs to force us to focus on day to day activities instead of standing on the mountain top yelling about how we are so much smarter than everyone else.
While I understand the frustration, I would throw this comment out:
If EVEP had not walked into the Utica via the acquisition of conventional, mature properties from Exco and Range years ago, this would be an MLP that likely would have imploded. Current coverage ratio is well under 1.0x
With that being said, EVEP still has one of the lowest coverage ratios in the E&P MLP sector. Can you imagine how ugly it would be if they traded like BBEP, with a 10% yield or a LRE/QRE with an 11%-12% yield?
As I said before, I think EVEP will eventually monetize their Utica acreage over the next few years, they will close the gap and likely push their distribution towards $4.00 or $4.50 but that will take time. The Utica deals will then have to be followed by purchases of mature properties. I think they are trying to pair sales and purchases. That makes it difficult.
The midstream build out makes things tight, as they are spending money but not recognizing full volume revenues. I suspect EVEP monetizes these assets over time as well.
I'm a buyer if this drops much lower.
I don't think the gas pricing in Ohio was a problem, but likely Pennsylvania.
Let's hope that Cohen had a flicker of intelligence flash through his brain when he projected $.56-$.57 for Q3 and $.58-$.62 for Q4
Really when you stop and think about it, they should already know what they are going to pay out for Q3. To give an absurd range of $.56-$.57 is really ridiculous.
Yes, they did screw up. They over promised and under delivered. They thought the Utica divestiture would materialize quickly. It didn't. Blame some of that on Aubrey McClendon. He hyped the Utica, like he hyped the Haynesville and other plays. Buyers were timid due to so few producing wells and lack of take away capacity.
I honestly think that EVEP will be doing good if they can divest the rest of the Utica at prices that allow them to get DCF back up to 1.0x or better and also fund midstream. It will be lumpy and unpredictable.
I think the real disappointment for many is that EVEP will likely end up back being a simple E&P MLP, with typical conventional and a few mature shale play assets. They will likely monetize midstream and redeploy that capital into producing assets. In the end, we'll likely see $4 maybe $4.50 in distributions. But with a 10% yield, that puts you at $45...a nice gain from todays prices, but a far cry from $70 for those poor souls that bought into the Utica hype.
As I see it, EVEP is monetizing the Utica to get the distribution coverage ratio back to 1.0x and hopefully boost the distribution down the road perhaps to $4.00/unit or a little better.
It remains to be seen if they can monetize the Utica quickly enough and for sufficient proceeds to redeploy into solid cash generating assets.
I don't own any EVEP, but if it trends back towards the low $30's, I'll be a buyer. They don't really have many specific assets that are great, but the Barnett properties are good as are the Austin Chalk properties.
I think they'll divest the midstream once it is fully built and volumes are ramped up. That should be a good arbitrage in itself.
Yes, same here. I bought some at $22ish and a bunch more at $19ish.
The Marcellus wells really should not have been as material as some people believe.
It was 2.4 Marcellus wells on a net basis, and one must remember that while the volumes are high, that they decline 80% in year one.
So, even if they had recognized high volumes and normal pricing, they would have needed to replace much of that production within a year as the wells tapered off. The proverbial treadmill that shale detractors like to point out.
I've always advocated that an E&P MLP can indeed drill heavily and even have a high decline rate, so long as they allocate enough maintenance capex. If you get better returns drilling wells (be they Miss Lime, Marble Falls etc) than buying flat mature production, then you go after the better returns. You simply must allocate appropriately.
What ARP did was opt to run with a low coverage ratio and hoped for the best (rising gas prices, strong well results, no take away issues) etc. They rolled snake eyes.
So, the Q4 guidance of $.58-$.62 will be interesting. If they fail to achieve the $.58 (low end) then they can kiss their equity goodbye.
Cohen is going to get DESTROYED on the conference call.
Cohen has been spouting off $2.35 in total distributions for fiscal 2013. That would have required us to get to $.65/unit for Q3 and Q4. Keep in mind they were throwing this number out nearly 6-7 months ago. This didn't just fall apart.
I think someone else put it very succinctly: Cohen will hold out hope until the bitter end that things will turn around and he can get on the conference call and brag about how smart they are.
Now he just nose-dived APL, ARP and ATLS...."quite satisfying"..."exhilarating"..."we rush in where others are fleeing"...
You are correct. Cohen is inept at day to day operations. He just can't leave well enough alone. His son's have driven multiple companies into the ground. RAS RSO, REXI
It also speaks to the fact that ARP needs to be more aggressive with hedging, up to 90% of current expected production. Cohen likes to play loose so he can "time" commodity price increases, which he is terrible at (see his fiasco at APL a few years ago).
Hedge everything 90% current year, 80% 2nd year, 70% third year, 60% 4th year, 50% 5th year. That takes into account natural decline, which means virtually no drilling risk. Then you only have to layer on 10% each year which means you aren't likely to materially lower your average price and you get the benefit of higher futures prices.
It isn't likely to hurt ethane any more than present. We are seeing massive ethane rejection. Once you are selling ethane btu's for the same price as natural gas btu's, it isn't likely to get much worse so long as they can accomodate the ethane.
Hey, look on the bright side, the coal bed methane properties don't have to worry about ethane rejection! (said tongue in cheek)
Propane is actually subject to rising with the export terminals expanding (Enterprise and Targa and now Energy Transfer).
I think whole barrel NGL pricing is closer to the bottom than many think.
I think the NE Pennsylvania pricing issue is going to have to get resolved for ARP to successfully continue developing NE Penn. Marcellus acreage.
In the interim, they can drill Marble Falls and boost oil production. Margins should still be good with oil hovering around $100/bbl.
Again, it's a reflection of Ed Cohen not having the ability to deliver bad news. It's an incredibly poor character flaw. He's well compensated to look after the interestes of the company, yet he is incapable of doing anything but delivering good news until the SEC mandated quarterly report.
And still they fail to mention oil production rates in the Marble Falls. Is it any wonder that most of the analysts don't bother following ARP and ATLS and only a few handle APL due to Dubay (adult supervision) being present.
He needs to retire and bore his grandkids to death with his ad nausem prattle.
I just don't think Cohen has ANY self control. He's like a little kid that likes to keep fidgeting with things.
But agreed, at least distribution is still projected to climb to $.56 in Q3 and $.58 in Q4.
What gets me is they should have tempered their enthusiasm and sandbagged like the guys at Legacy and Vanguard. LGCY management openly says they aren't going to grow the distribution aggressively and that they are managing for the long term.
So now ARP can join Linn in the "time out" corner.
The one thing ARP has going for it is that the price never reflected a $2.60 distribution to start with. We've been trading at $21 for months which means the drop hasn't been terribly painful.
ATLS on the other hand has had to deal with poor results at both ARP and APL!
I'd say expect $.56 for Q3 and $.58 for Q4, even though 4Q '13 was projected at $.58-$.62. If they have the cash to pay out $.62 in Q4, I'd prefer they simply reinvest it into the Marble Falls and keep oil production creeping upwards. After all of these years, Cohen still hasn't managed to learn ONE thing about running an MLP, not a SINGLE thing. You ALWAYS under promise and over deliver, he in turn always does the opposite. He's never learned to leave well enough alone, he's never learned that he can't time commodity price fulctuations, he's never learned that having a silver tongue won't mask inept management...
I'm curious if Cohen still thinks the results are "quite satisfying"....
I also wonder if the "afficionados of the tyranny of quarterly reports" will be ready to skewer him for his blatant dropping the ball. The 2 Cooperman's will likely chime in on this call and I am very anxious to hear younger Cooperman. He never pulls punches with slick Eddie.
I bought at $22 and then again at $19, so I am sitting on minimal gains. I expected these guys to actually deliver. Instead, Cohen screwed up again.
I do agree though that this is a nice income producer. Let's hope they can achieve the $.56 and $58 projections.
So now, it appears that we can expect $.56 and likely $.58 for Q4. That would be $2.32/unit annualized.
We also now see why ARP isn't covered by most analysts.