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Energy Transfer Partners, L.P. Message Board

werawc 2 posts  |  Last Activity: Jan 1, 2015 1:31 PM Member since: Nov 15, 2001
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  • Reply to

    Book Value

    by mojorisin1323 Dec 31, 2014 9:14 AM
    werawc werawc Jan 1, 2015 1:31 PM Flag

    Book value is not relevant, since oil at $50 or $60 could necessitate not only goodwill write offs, but impairment charges due to lower reserve valuations. Cash flow is what really matters. The hedges help with that for now, but as their good hedges roll off and more production is sold at spot prices, cash flow will suffer too. We really need oil prices to recover by the end of 2015 to assure long term sustainability of a decent distribution.

  • Reply to

    Book Value

    by mojorisin1323 Dec 31, 2014 9:14 AM
    werawc werawc Jan 1, 2015 1:21 PM Flag

    There is a high likelihood of a 100% distribution suspension by the end of April when the borrowing base re-determination occurs. The current borrowing limit of $2.5 billion was set when oil was in the $90 to $100 range I believe. With oil around $50 or $60 in April, if it is still there, the banks will lower the borrowing limit substantially, probably to below $2 Billion. With $2.15 Bililion drawn and outstanding right now, the new lower limit will put them in an overdrawn position, triggering a covenant which does not allow any further distributions to be paid to unit holders until sufficient debt is re-paid to bring the outstanding amount to be under the new lower limit. But do not panic even if a 100% suspension occurs, as the same thing happened in 2008/2009. When the suspension was announced back then, the unit price soon bottomed, and rose from about $6 to about $15 during the next 2 years that it paid no distributions. When they resumed distributions in 2010 at $1.50 annualized, the unit price at $15 or so was giving it about a 10% yield. In other words, the unit price doubled while they paid no distributions !!! There is also a chance that management is pro-actively negotiating with the banks right now, in advance, to perhaps strike a deal along the lines of an immediate distribution cut of 50% or more, with the savings used to pay down some of the the debt right away, in exchange for waiving the covenant that would otherwise be triggered in April to totally suspend the distribution.

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