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AlanHHI

 
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  • Vanguard Natural Resources Bonds: Throwing The Baby Out With The Bathwater [View article]
    It is a superb bargain, but don't be surprised if it becomes a better bargain for some time to come. There will be a day when oil bottoms and then VNRs equity (both common and preferred, but specially common) will zoom. The problem is that you (or at least I) need a strong stomach until that day comes.
    Will oil bottom at $55, $50, $40, or lower. Who knows? I'm very confident that oil will bottom long before the end of next year. I wouldn't be surprised if oil bottoms before then end of this year. Thus, I expect VNR's hedges to keep revenues largely unaffected by the price of oil. The real question is how much oil will sell for after the current trouble goes away.

    The Saudi's need $93 (Brent) to balance their budget. They've got years of reserves so they can run deficits for quite a while. Thus, I expect a long-term Brent price of $90+. I think we'll see that next year, but it could take much longer than that.
    Dec 13, 2014. 02:54 PM | 1 Like Like |Link to Comment
  • Vanguard Natural Resources Bonds: Throwing The Baby Out With The Bathwater [View article]
    I second this common. I'm currently holding preferred (largely VRNCP, but a little VNRBP). This analysis of the bonds gives me a lot of comfort as a preferred holder. It should be noted that the current price of the VNRAP preferreds is considerably higher than the price of the VNRBP and VNRCP. I know of no reason why the A's should yield anything appeciably different from the B's and C's. When I want to buy more of the preferreds I just pick the one yielding the most at the time of purchase. At the close of trading yesterday the yields of the A's, B's, and C's were 11.11%, 11.98%, and 11.89% respectively.
    Dec 13, 2014. 02:43 PM | 3 Likes Like |Link to Comment
  • Vanguard Natural Resources Bonds: Throwing The Baby Out With The Bathwater [View article]
    The VNR stress test was published on Oct. 15 when oil was about $80 and just peeking below it. At the time, stess tests going all the way down to $70 was very comforting, at least to this VNR unit holder. It would be great to see the company's result currently, testing down to oil prices at $50 or below. Unfortunately, I haven't seen any update.

    That said, as the author noted above, no one else has even published a stress test at any level.
    Dec 13, 2014. 02:34 PM | 2 Likes Like |Link to Comment
  • QR Energy Benefits From The Merger, How About BreitBurn? [View article]
    I own both QRE and BBEP in size. I was not expecting a distribution QRE increase for several years. On the other hand BBEP has raised the distribution each of the last 16 quarters. I fully expect another distribution increase for BBEP's third quarter to something like 2.05 per annum.
    DCR can move considerably from quarter to quarter. BBEP acknowledged this in their conference call and they expect a DCR for the full year of 1.0. I'll give them the benefit of the doubt for now.
    Lastly, the current prices of QRE and BBEP yield about a 6% discount for QRE (i.e., 98.56% of the BBEP price (98.56% of 21.79, or 21.47) is more than 6.5% more than the QRE price (20.15). I've concentrated my holdings in QRE to get that difference as well on closing. I'll give up a little on the distributions buy I'll make much more on the unit-for-unit transfer.
    Jul 27, 2014. 03:56 PM | 6 Likes Like |Link to Comment
  • Breitburn Energy Partners: A Few Reasons Why I'm Staying Long [View article]
    I've been long BBEP since 8/12. They have increased distributions every quarter for the last 15 quarters. With the POSLTE deal they should be able to continue quarterly increases for the next several quarters at least. Zorro is correct that P/Es don't mean much for upstream MLPs (or really any MLPs). The key metric is the Distribution Coverage Ratio (DCR). Over 1.20 is a signal for a distribution increase, and under 1.00 is a warning. BBEP's DCR for 3rd qtr 2013 was 1.32. Right now, everything looks good and we'll know more on 2/27 when 4th qtr results are published.
    Feb 13, 2014. 07:14 AM | 4 Likes Like |Link to Comment
  • Why Are Upstream MLPs Moving Towards Monthly Dividends? [View article]
    I subscribe to bullmarket.com. They cover a lot of stocks buy they are specialists in income investing, particularly MLPs. They put out their 2014 High Yield report earlier this month.
    Dec 12, 2013. 04:50 PM | Likes Like |Link to Comment
  • Why Are Upstream MLPs Moving Towards Monthly Dividends? [View article]
    I subscribe to bullmarket.com. They cover a lot of stocks buy they are specialists in income investing, particularly MLPs. They put out their 2014 High Yield report earlier this month.
    Dec 12, 2013. 04:50 PM | Likes Like |Link to Comment
  • Why Are Upstream MLPs Moving Towards Monthly Dividends? [View article]
    Well done, and I agree with your comment that the primary advantage of monthly dividend payment is the dampening of price change after dividend payment.
    However, I do not agree that VNR is currently the best upstream MLP out there. I believe that after the POSTLE transaction in mid-July BBEP has become the best upstream MLP available. Current yield is 10.3%, distributions have been raised for each of the last 10 quarters, and distributable cash flow (DCF) is greater that 130% of the current yearly distribution.
    BBEP is currently priced at 18.85 and it yields 10.3%. I believe that BBEP should trade at about the same yield as VNR. VNR's yield is currently about 8.75%. I think it's fair to expect VNR to trade at a slight premium to VNR so I target a price for BBEP to yield 9%. BBEP priced to yield 9% would be just over 21.5, a 10% increase.
    Thus, I'm looking for a 10% rise in the price of BBEP in addition to the 10% I'm being paid while I wait. Full disclosure, BBEP is the highest weighted stock in my portfolio.
    Dec 10, 2013. 08:12 AM | Likes Like |Link to Comment
  • 2 Attractive 10% Yielders From The Energy Patch [View article]
    That's right, the secondary dropped the price 5% yesterday. The entire secondary was sold yesterday and early this section. The price has already returned to 18.75 and I think it will be all the way back (or more) by end of day today or tomorrow.
    Nov 14, 2013. 02:08 PM | Likes Like |Link to Comment
  • QR Energy: An Oil Focused Upstream MLP With A Large 11.50% Yield [View article]
    Good job, but any article on QRE should include the effect of the 16.7 million preferred shares that can be converted to common as soon as 10/3/13. Once converted the distribution on these shares goes from annual distribution rate of 0.84 to the common distribution rate of 1.95. All other things being equal, this conversion will severely impact the coverage ratio.
    QRE has implied, when asked, that there will be no conversion "in the near future". I believe that the conversion will be managed so that the coverage ratio will not be a big problem. However, that is only my personal belief based on what I have heard from management
    In addition, the general partner has the right to take 80% of its IDR and convert it to common units each December. This reduced the coverage ratio when the GP exercised this option last year. I assume the GP will be doing this every Dec. unless the coverage ratio would drop to an unacceptable level.

    QRE has a great yield, but it is unusually risky because of these issues. That all said, I am long QRE.
    Aug 15, 2013. 11:01 AM | 2 Likes Like |Link to Comment
  • Vanguard Natural Resources Is Ready To Deal [View article]
    Well done. I think it's also important to note that VNR is very conservative in how they define DCF. They reduce adjusted EBITDA by all interest expense (not just "cash interest expense"), and by all capex (not just maintenence capex). As a result, I find that a VNR coverage ratio of 100% is about the same as a 120% ratio for one of their peers.
    Aug 6, 2013. 04:14 PM | 2 Likes Like |Link to Comment
  • QR Energy: Huge Yielder Priced Too Cheap [View article]
    Please see my comments to Phil above. BBEP said on the call the secondary for the acquisition has already been done and they will have $400 million borrowing capacity after closing the acquisition.
    Jul 2, 2013. 10:17 AM | Likes Like |Link to Comment
  • QR Energy: Huge Yielder Priced Too Cheap [View article]
    RE: BBEP

    SA has not published a transcript of the conference call for the acquisition, but BBEP was questioned closely about the need for an equity offering. As I remember it BBEP said the one their previous offering (on 2/7/13) was done in anticipation of this acquisition and they do not need an equity offering to close this acquisition. In fact, after the closing they will still have $400 million of borrowing capacity left.

    That said, equity offerings are part of the MLP game, and I'm sure there will be another one down the road, but not necessarily soon.
    Jul 2, 2013. 10:10 AM | Likes Like |Link to Comment
  • QR Energy: Huge Yielder Priced Too Cheap [View article]
    RE: QRE

    Phil, you're right about what the 12/31/12 10-K said. However, the first qtr earnings release issued on 5/8/13 said

    "Holders of the preferred units mayelect to convert the preferred units into common units at any time after October 3, 2013, or sooner upon QR Energy's achievement of certain trading price criteria."

    I (and I believe the market) are going by the 10/3/2013 date.
    Jul 2, 2013. 09:53 AM | Likes Like |Link to Comment
  • QR Energy: Huge Yielder Priced Too Cheap [View article]
    Phil,
    Excellent article on the MII. I also was initially confused but figured things out. Another important piece of the QRE puzzle is that the sponsor has the right to convert 16.4 million preferred units into common on or after Oct. 3, 2013. The distribution for the preferred units is 0.84 per year, it's 1.95 per year for the common. Obviously, the sponsor will be electing to do this as soon as they reasonably can. This will probably be on Oct. 3 unless the coverage ratio will be destroyed by the conversion.
    I still think that QRE is a good value but the looming conversion makes the 11% yield at current prices about right, especially when combined with the MII issue you explained so well in your article. Truth is, I just sold some QRE late yesterday (at 17.63) and used the proceeds to buy more BBEP (current yield 10.4%).
    In my opinion, BBEP went from worst to first when they announced their acquisition Monday morning. Their coverage ratio for the first quarter was a putrid 0.67, but with the acquisition they project a coverage ratio of 1.4 for the second half. 1.4 is as good as 0.67 was bad and I look for them to continue to increase their distribution each quarter as they have since May, 2010. Please note however, that BBEP actually suspended distributions from May, 2009 through Feb, 2010 so nothing is guaranteed.
    Jun 29, 2013. 08:40 AM | 2 Likes Like |Link to Comment
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