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Memorial Production Partners LP (MEMP) Message Board

rrb1981 119 posts  |  Last Activity: Apr 17, 2014 8:54 AM Member since: Apr 18, 2001
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  • Reply to

    Houston, January 15,2014 / PRNewswire

    by rancher5858 Jan 15, 2014 12:45 PM
    rrb1981 rrb1981 Jan 19, 2014 3:16 PM Flag

    The fact remains that EVEP's Utica potential is largely intact. Yes, they have done a miserable job of unlocking the value but it remains a very valuable asset within their portfolio.

  • Reply to

    capex plan

    by lizahuang54321 Jan 23, 2014 6:11 PM
    rrb1981 rrb1981 Jan 26, 2014 6:10 PM Flag

    So, the relatively moderate capex plan is both a blessing and a curse.

    For income investors, it means they will likely not experience many, if any at all, of those months where distributions are either negligible or non existent.

    The downside is that capex helps build reserves and production. SJT has a lot of Mancos Shale potential and some day it may mean a windfall for SJT. However, that may mean a double edged sword of SJT having to fund drilling participation and since this trust is primarily NPI's and not true "royalties" off the top, distributions could go away for a long time if capex is cranked up. It would be a very interesting case to watch SJT if the Mancos Shale blossoms.

    In the interim, SJT is likely to crank out $.07-$.10/month for 2014.

  • At the risk of being repetitive: Joe Mills sucks. Big time. Always has. Always will. He simply put cannot manage a business. He drove Eagle Rock into the ground, twice. He sold off the best assets years ago, the mineral royalties. Then he sold off the midstream business. Now he is proving he cannot manage the upstream business.

    It sounds like the BoD needs to issue him a ton of units as his focus is clearly lacking. Perhaps a bonus too.

    Compare these EROC clowns to the guys at Legacy Reserves. LGCY is one of the more conservative, well managed E&P MLPs you will find. They do proper due diligence, they under promise and over deliver. They buy with an eye on the long term, not making the quarter. Mills would do well to follow the lead of LGCY instead of trying to pretend like he knows what is going on.

    Will be interesting to see if this drops back to the low $5's. I like how they reassure the investors that the coverage ratio will do better due to organic drilling and future acquisitions. First, they haven't proven they can successfully manage the decline rates associated with aggressive drilling, two, they have successfully proven that they are inept at making acquisitions.

    It's a good buy at $4.80-$5.00. At these prices, you'd be better off investing in something like MEMP and then maybe buying into EROC when they cut the distribution again in a few years.

  • Will ARP unit holders still receive the 4Q distribution?

    As for the monthly conversion, it was about time. BBEP, LINE, VNR and others headed that way.

  • rrb1981 by rrb1981 Jan 31, 2014 9:33 AM Flag

    I still contend that LGCY is one of the better managed E&P MLPs. Though the price has slipped a bit, the distribution continues to steadily increase at a modest clip.

    They still have a fairly strong balance sheet and excellent prospects within the Permian basin.

    A nice boring income producer!

  • Reply to

    Looking for breakout.

    by dunrunnin2 Jan 22, 2014 3:58 PM
    rrb1981 rrb1981 Jan 31, 2014 10:53 AM Flag

    Well said.

    KMI's recent "disappointment" regarding dividend growth seems to have hurt the stock, but the reality is that KMI is a near 5% yield and they plan to grow the dividend by 4-5% a year. They have some issues with EPB, which has a one year hiatus on distribution growth, but KMP, the real growth driver, appears to be plodding along and as long as it is growing at 3-5% a year, KMI should achieve modest growth.

    I could be dead wrong, but I think the sell off in KMI is probably running out of gas. 5% yield for what will be a pure play GP (in a year) with decent growth looks like a solid buy to me, especially in a market full of overbought names.

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Jan 31, 2014 12:55 PM Flag

    Hmm, had not seen the 2017 comment from Goldman Sachs.

    The roll up of EPB into KMP is harder than it appears because KMP's IDR load is much larger. A conversion of EPB to KMP units would require a large IDR waiver from KMI. Likely a staggered waiver.

    I actually like EPB at these prices, event absent distribution growth, which seems unlikely for '14, but I am not convinced EPB won't grow some in '15-'17. Even modest 3-4% distribution growth will help bring EPB's price back where it can be an equity again. I suspect that Kinder may indeed use EPB as a second financing vehicle, at least, given the cheaper cost of equity, it would make sense. I guess we'll have to wait and see.

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Feb 2, 2014 5:50 PM Flag

    Because KMP has been in the 50/50 splits for much longer. In fact, KMP's IDR load is almost equal to the current distribution, making their cost of equity capital much higher than EPB's, where the current IDR load is much lower (even though both are in the 50/50 splits).

  • rrb1981 by rrb1981 Feb 3, 2014 10:45 AM Flag

    I just picked some EPB up. 8% yield (static till early '17).

    I know it's a flat distribution for several years, but frankly, it is hard to justify putting money into some of the high fliers. While many of the lower yielding MLPs have phenomenal distribution growth, the market has priced them as if they can do no wrong and all will go perfectly. I'm not selling my quality names like EPD, SXL, MMP, PAA, ETE but I'm not interested in adding to them at these prices either. I may end up being wrong, but I struggle believe I can reinvest distributions into a 3.5% yielding MLP and expect to get market beating returns.

    EPB is a special situation, a turn around play. In the interim, I get a nominal 8%. At 8% I feel like the market is doing an ok job of pricing in the lack of growth versus say a 5% yielder that has 8-10% annual growth.

    In any event, it isn't going to be a game changer one way or another. If it recovers back to $33 (where I think it is fairly valued), then i make a little and pick up distributions as well. If it languishes, I collect my distributions.

  • Reply to

    Legacy Reserves

    by rrb1981 Jan 31, 2014 9:33 AM
    rrb1981 rrb1981 Feb 3, 2014 11:17 AM Flag

    I picked some up in mid $26 range. May pick up some more upon upcoming wave of distributions/dividends in a few weeks.

    I cannot explain the drop, but I firmly believe LGCY is the best oil focused E&P MLP. 70%-75% of reserves and production are in the Permian, with most of them being long lived (i.e. mature, low decline). They are heavily PDP and the balance sheet has under 3.0x leverage.

    I don't really understand the quick plunge, but at these prices, I think it is a good buy and I'll likely continue to add if it stays down.

    What is interesting is that given their large position/foot print in the Permian, they have a lot of opprotunities to participate in drilling in some of the hot plays. Provided the IRRs are high, this gives Legacy a sort of growth component. So long as they don't lean into drilling to heavily, they can manage the decline rates while also building reserves and getting some attractive returns.

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Feb 3, 2014 7:21 PM Flag

    I know with 100% certainty that you are incorrect. The IDR's are indeed incremental on a going forward basis, but the level at which you enter the 50/50 splits is important. KMP has been in the 50/50 splits for years EPB not nearly as many.

    KMP's LP distribution is $5.44, the "hidden" IDR load on a per unit basis is about $4.60. That means for each and every existing KMP unit, KMP pays out about $10.06 a year, with $5.44 going to the LP unit holders and $4.60 going to the GP (the holder of the incentive distributions rights and the 2% economic GP interest).

    EPB pays out $2.60 in LP distributions per unit and the GP take is about $1.02 per unit.

    If you read the annual report, or any of the brokerage reports that get published, you'll see the IDR tables. It's a common misconception to think that both being in the 50/50 splits means they are equal. Far from it. In fact, the above mentioned facts further highlight how remarkable Rich Kinder has been at growing KMP (and KMI).

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Feb 3, 2014 7:23 PM Flag

    I think if you will take the time to read the 10-K and find the paragraph highlight the incentive distribution rights, build a spreadsheet (I have already done so and will be happy to email it to you, along with the one I built for EPB), you will see the "magic" of the IDRs. You can also fact check by looking at the presentations.

    BTW, I feel 100% certain that Liza will agree with me that the IDR load at EPB and KMP are indeed not the same. Liza has been investing in MLPs for nearly as long as I have (I got in around 2000).

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Feb 5, 2014 8:32 PM Flag

    Again, if you would read the 10-K and build an IDR spreadsheet, you would see the error of your logic. The offer still stands for me to send them to you if you desire.

    The second error is simply assuming an incremental dollar of DCF. You must also assume the incremental equity financing. I think that it will become clear why KMP is the goose that lays the golden egg.

  • Reply to

    Earnings (using the term loosely)

    by obboi Feb 2, 2014 4:57 PM
    rrb1981 rrb1981 Feb 5, 2014 9:12 PM Flag

    Agree. I believe it will go sub $5.00, but the market will decide..not me!

    It is a "decent" buy below $5.00 but you are buying a poorly run company with a lousy CEO and marginal prospects and assets.

  • Reply to

    Going down, down down

    by obboi Feb 6, 2014 7:11 AM
    rrb1981 rrb1981 Feb 6, 2014 7:57 PM Flag

    The company has sold off its crown jewels. Now they must learn to execute on the E&P side. These guys really don't have a tremendous suite of high grade assets. This one is a value under $5.00 but not an orphans and widows stock.

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Feb 7, 2014 6:33 PM Flag

    I'll pull the spreadsheets up later and post results, but again, you are going about it the wrong way. Trust me that Kinder knows which is best for KMI. KMP is so deep into the 50/50 splits, that the IDR is almost equal to the LP distribution! If you follow MLPs, you will understand the enormous growth that it took to push KMP to that realm.

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Feb 7, 2014 7:18 PM Flag

    What is being overlooked is that incremental income requires financing. Each unit of KMP that is issued delivers $4.60 of incentive distribution rights to KMI. For EPB, each incremental unit only delivers $1.02. If we adjust for the unit prices, as KMP is 2.54x the price, then they would need to issue 2.54 units of EPB to raise an equal amount of cash. That would mean $2.59 in incentive distribution rights to KMI. As you can see, KMI rakes in an additional $2.01 on an adjusted basis via the equity raise to finance the projects that generate your hypothetical incremental dollar. When you run through the math, and again, the offer still stands for me to send you copies of both the KMP and EPB Incentive Distribution tiers. When I run the model, KMI consistently generates more cash by raising through KMP than through EPB due to the very high IDR load on KMP. In a model I just ran, assuming KMI doesn't buy the KMP or EPB units issued to finance the deal, KMI garners about 40% of the incremental accretive cash and under KMP it collects about 47%.

    You see, simply looking at the 50/50 splits level won't cut it.

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Feb 7, 2014 7:22 PM Flag

    And since it is difficult for you to find in the 10-K, the one from last year is available on the website. You can go to page 149 and find the IDR tiers.

  • rrb1981 by rrb1981 Feb 8, 2014 10:42 AM Flag

    Well, EROC didn't drop below $5.00

    Yield of 11% at present. Not enough premium when you can buy much better run E&P MLPs for 9%-10%.

    EROC needs to convert to a monthly payer and then they need to focus on high grading their portfolio.

  • Reply to

    Now is the time KMP should takeout EPB

    by el1genio Jan 22, 2014 9:02 PM
    rrb1981 rrb1981 Feb 9, 2014 6:45 PM Flag

    No problem. You are one of the few who have taken the time to dig into the details. So much nonsense gets posted on many of these boards that don't understand the IDRs etc.

    Anyway, back to EPB. Taken a real beating lately. I think Kinder may need to rethink directing some growth projects towards EPB in order to help push distribution growth forward from '17.

    It is actually starting to look like a good bargain at these prices, even without distribution growth for years.

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