You seem confused. The newly issued shares by SXE to the PE firms for the equity cure - they did not nor will they ever be part of the public trading. Thus, they had absolutely nothing to do with today's or yesterday's trading.
You need to understand that EIG and Tailwater want to keep these units in their pocket so that they can accumulate their magic 80% for total control.
On # 1, if the annual EBITDA for the AL and MS business is only $ 8 million, then with 2016 EBITDA pegged at $ 86.4 million going up to $ 110 million next year, then they should sell the AL and MS business. They should be able to sell those for about 10 x to 12x EBITDA, or about $ 90 million or so. Take that money and reduce the revolving debt.
On # 5, their response does not make sense. They have already told us that 2016 EBITDA will be about $ 86 million, there is no way they will get under the 5.0 debt/EBITDA coverage without more equity cures or relief on the covenants.
Truly appreciate your feedback. Response to # 7 does not surprise me. There is no way IR could really tell us the truth - and they are not. However, taking their response literally, the big retention bonuses for the Tres Amigos is good to November 1, 2016. That is a fact and IR stated that was for the long term ?? Confirms my suspicion, Bonn et al are not needed beyond that date.
Truly amazing that LGCY was up 13% during regular trading already. Blows my mind that LGCY with all of its residual problems is trading at 3 - and our little SXE at 2
The 8.04 million of new units issued to Holdings were not and will not be part of any public trading.
Thus, there should be no effect on the public trading of SXE other than the fact that total units outstanding just went up by 8 million units, meaning Holdings' part of the total pie just went up by 8 million.
The emphasis is on SHOULD because there are way too many people trading SXE who think that these 8 million will be traded now, which it will not.
Hopefully, you had a chance to talk to IR, would be curious to know their responses.
Seems that you are referring to something else, other than SXE is that correct?
How about asking what percent of the total EBITDA is coming from the pipeline businesses in Alabama and Mississippi. These business are less tied to the price of NG but are driven by the flow of NG to various customers, like power plants and other industrial facilities. Therefore, they should be worth more now due to the stable income.
What if the AL and MS pipeline business were sold off, pay down the debt, and concentrate on the Eagle Ford. This would go to Cube's question about selling off assets.
Seems that you are missing the point. The point is/was that whatever revenues that SXE is recording, they are independent of the capacity. The key issue is the financial efficiency of SXE's operation. Their operating costs are significantly higher as compared to their peer group.
Have a look at TRGP's web site and you will see that they operate a large fractionator in the Eagle Ford, rated at 200 MMscf/day. DPM also has a lot of NG and NGL facilities in the E/F. Just look at their web sites.
Bottom line; they are larger and better buying power - pure and simple.
The issues you bring up are truly valid head winds for SXE - but that is the same for the other G&Ps.
Let's face it, all of the oil and gas MLPs have been operating at sub par utilization over the last year plus, correct?
Next, interest expense does not come into play for the operating costs per se. That category is for internal labor and supplies as well as sub-contractor or vendor costs plus consumables, such as electricity, water, etc at the various gas processing plants and/or compressor stations, etc.
Thus, given under utilization of capacity at SXE's peer group, my point still is that SXE's cost as a percent of revenues is way too high as compared to its peers; CEQP, DPM, or TRGP. The fact that SXE is so small compared to the others, shows that we do not have the economy of scale that the others do.
If SXE could operate at an average of those three, then there would be an additional $ 60 million in EBITDA available - a hell of a lot more than the suspension of distributions got them.
Totally agree with you; the banks will, IMHO, not want to wait around, in search of some optimum time for market improvement and then sell. NO, they want this sold and soon.
Yes, the Russians want to sell their nat gas to Europe - but - Europe has seen all too many times over the last few years, that Russia has cut their gas off in the winter to make whatever political point that they wanted to make. Bottom line: Russia is not a reliable supplier of NG and the Europeans know that.
Looking at the 2015 total revenues and cost of revenues for SXE and comparing them to other G&Ps, such as TRGP, DPM, and CEQP some interesting data surfaces. Here is the list of total 2015 revenues, cost of rev, and very importantly the percentage of the direct cost of revenues of the total.
--------------------------------------------SXE ------------ DPM -------------- TRGP ------------- CEQP
2015 Total Rev in $ millions ---- 698 ----------- 1,898 -------------- 6,659 -------------- 2,633
2015 cost of rev, in $ millions ---- 600 ----------- 1,460 -------------- 5,378 ------------- 1,884
2015 Percent of cost to revs ----- 86 % ---------- 77% --------------- 81% ---------------- 72%
So, what does this all mean? It means that another or better means to improve the EBITDA is to reduce the cost of revenues to bring them more inline with other G&P firms. That means the percent of the cost to revenues should be or could be about 77% ( i averaged the #s for DPM, TRGP, and CEQP ). Taking the $ 698 million revenues for SXE, then our cost should be more like $ 537.46 million vs. the actual of $ 600 million for a delta of $ 62.54 million. That $ 62 million should be added to the EBITDA.
Now, the question then becomes, why can't the Tres Amigos accomplish that which other G&Ps can do in the same areas dealing with the same issues. The only significant differentiation is economy of scale. Just look at the revenues of the G&Ps that our little SXE has to compete with. One would have to assume that Bonn et al will or have been trying - but they can do only so much.
Bottom line, the larger players in our sand box are much more efficient with the cost of revenues, that if one of these larger G&Ps were to buy our little SXE ( plus Holdings ), then significant cost reductions, EBITDA increases are possible. One would have to believe that independent business folks, including the new owners of the Holdings ( the banks ) have got to be looking at this issue as well.
Right you are. That was exactly my point. The banks want to get their money back - somehow. But if they sell only their 33% in Holdings, the PE are still running the show and the buyer of that 33% will not offer much, knowing that they are a minor owner. NO, the banks " caved " only because of an agreement that we are not privy to between the PE firms and them to sell the whole enchilada soon.
That is the proverbial $ 64,000 question. However, IMHO, this will be sold for $ 7 to $ 9 / unit by November 1, 2016.
Have gone through 3 major ch11 cases with a lot of detail; Mirant, Calpine, and Dynegy. What was clear from all of them was that the creditors, the banks or bondholders, they call the shots and get the bulk if not all of the equity in the newly organized company. The fact that the two PE firms, who were the shareholders in the old debtor, and that they now control 67% of the new company equity can only be possible if there is/was some type of deal between EIG, TW, and the banks.
Thus, the only thing that makes sense is for Holdings and SXE to be sold soon so that the banks can recover their $ 700 million.