bill asks a good question. Specific to TNK, do you know if this condensate can be carried in crude tankers MSN? I think this develpment is good for TNK either way (assuming regulators don't try to stop it). But TNK would benefit to a greater degree and more directly if this new product can be carried in their dirty tankers.
I like your comments here MSN.
Answering your question - In an earlier post pb provided a "back of the envelope" projection of $.10 / qtr that could be derived from the brokerage business. He assumed a certain number of ships, 1.25% fee on the charter value, and a rough guess on the average charter set at what I felt was a reasonabley conservative level. (sorry if I didn't get this exactly right pb, I'm writing this quick and on memory alone). I agree with his numbers with the understanding it's a very rough estimate, not a quote. I do think it's realistic though. And the real point I was trying to make is that adding the brokerage should allow for a higher, sustainable dividend that will substantially increase the floor for share price (vs $2.50/share in recent memory). Plus a lot of potential upside.
Agree we still need to know what TNK pays to TK. Somewhere along the way, perhaps in the CC, I believe they did refer to this as a purchase. I don't have time to go looking for that language now though. But I'm going to assume it's not simply gifted.
All of that said, I'm skeptical that speculation about the brokerage, by itself, will support this huge rise for long. Details need to emerge. When they do, I sure hope I'm right.
I think the fee based brokerage could help provide a floor for this stock, perhaps in the $5 range? Imagine $.10/share from the brokerage + $.03 a share that TNK currently pays, for a consistent, reliable, $.13 / qtr payout. That's $.52/yr. At a 10% yield you're looking at a $5.20 sp. I can't imagine the sp dipping below $5.00 too often in that scenario. Then you have a lot of upside potential from there. It's easy to imagine a $10 - $15 sp (heck, we were over $13 back in 2010, with rates well below the all-time highs, and without the brokerage). This assumes of course the brokerage portion can really delivery $.10/qtr and that the market views it as safe.
I agree with MSN here that rates aren't really giving any comfort as of yet. We definitely need improvement in rates to make all this happen. And perhaps the current strength in sp has more to do w/ "chatter" about TIL as MSN suggested? Who really knows what made somebody so anxious to buy. At least a little bit of it probably has to do w/ momentum chasers and/or short covering. But I also agree with pb that the brokerage can be a bit of a game changer. Of course, we have yet to see the details of the brokerage. Hopefully this $.10 figure isn't just wishful thinking.
Accoring to the MF article - "Looking ahead to 2014 LINN Energy expects its production to be in a range of 1,070-1,140 MMcfe/d. Given that production range as well as its current projections for commodity prices and expenses, LINN Energy expects to produce $12 million in cash flow in excess of its distribution in 2014. That should ensure that the company's distribution to investors remains strong in 2014."
Does anyone know where he came up with the $12million projection?
MSN, I'm looking at Teekay Tankers Investor Day Presentation from June 18, 2012. On one of the slides they discuss the "Strategic Benefits" of their 13 vessel acquisition from Teekay Corp. The second bullet point says "Increases near-term fixed-rate coverage from 29% to 43% for the 12-month period commencing July 1, 2012." Moving to a ~40% fixed rate coverage is not new, and did help them through a very difficult rate environment. TNK last fixed charters in the summer when the previous contracts were up, to maintain fixed coverage in this 40% range (Summer was still a very difficult time for rates don't forget). You seem to want to characterize the fixed contracts as a new approach that happened just as the spot market heated up, and thus shows how incompetent management is. That's simply not true.
It's both. And yes, it CAN be both. They fix as a hedge to stay out of trouble in tough times, and then they have 60% of the fleet trading spot, which will seriously raise their overall prospects if rates rise. You know that MSN. You may prefer 100% spot, another person may prefer closer to 100% fixed charters. TNK has a mix. If you prefer 100% spot that's fine. But I simply can't understand why you're so critical of TNK for the mix?
The printed transcript came out. To answer my own question and confirm the 1.25% figure: per Bruce Chan - "On your first question, Jon, it's expected that the transaction would close in Q2. And in terms of guidance, we can probably give a little bit better off-line. But as you know commercial pools charge 1.25% of gross rates and a couple of hundred dollars a day, somewhere between $200 and $300 a day, for administration costs. And so that's kind of the revenue line. And then there's, obviously, associated costs with that. But I can't really give you much more than that at this time."
I like it. They definitely used the word "sale" to characterize the transfer of Operations, so this cash flow does not come free to TNK. But still, a steady $.10/share will be very nice.
Regarding the lag effect of rates, which I believe also came up in some earlier post - they responded to a questioner that there is an ~ 2-3 week lag between posted daily rates and what the company actually books. I take this to mean that last 2-3 weeks of good rates seen for Dec in Intertanko will count toward 14Q1. And last 2-3 weeks of March will count toward 14Q2.
To the first questioner on the TNK call, they responded they will close on the Operations dropdown Q2. They also commented that the operation earns 1.25% of charter fees plus a "couple hundred per day" (or something like that) for managing tankers. Or did he mean the 1.25% comes to a couple hundred per day? I believe this question came up in an earlier post and PB or MSN may have responded.
On the TK call they sounded very bullish about a turn for mid-size tanker market. No detail on the Teekay Operations drop down. It continues to sound like a very positive development for TNK. TK is moving everything related to mid-size dirty tankers to TNK /TIL. TIL will be a buy/resell operation. TNK will be paid to operate TNK and TIL assets, like TK would have done in the past, while TIL waits for assets to appreciate. But I have no idea how to put numbers on any of this for TNK and no information on timing.
Both TNK and TK have posted earnings call presentations. TNK has a slide showing projected 2014 off-hire days. They plan 6 vessels for 141 days in total. The TK presentation goes a step further and provides a comparison to TNKs 2013 days off-hire at 236 total days. 40% fewer days off-hire expected for 2014.
just down to where we were late last week, and the volume is light. I wouldn't read anything into this unless it picks up momentum. Tomorrow should be a very interesting day.
I don't understand where you're coming from with all this MSN. I'm looking at rough numbers for share price of NAT and FRO vs TNK. I don't remember for sure when VLCC rates shot up to start the trend, but I'll pick the beginning of November just to get started. For NAT the share price has moved from roughly $8 to a close today of $10.28. FRO went from roughly $2.20 to $4.61 today. I think it's reasonable to suggest FRO's share price has been influenced substantially, both to the downside pre-rally and to the upside today, by bankruptcy speculation. TNK went from roughly $2.70 to $4.01 today. I'm pretty happy with TNKs participation in this rates rally.
What panic are you talking about? TNK has had a mix of fixed and spot for as long as I remember (traded around a core since 2009).
I believe when they fixed the dividend they were changing the focus, temporarily, from dividend to growth. Instead of flipping back to a floating dividend or paying out a special, I think what we should be looking for and hoping for is an announcement about acquiring ships. I liked the floating dividend too and think the current rates would have been great for both divvy and share price under the old model. But at this point they should concentrate on growing.