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Douglas E. Johnston

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  • Exco's CEO ouster may signal potential suitors [View news story]
    if i had to guess, he will raise PE $$$s like Aubrey et. al. and we will hear from him again
    Nov 22 01:11 PM | Likes Like |Link to Comment
  • Exco's CEO ouster may signal potential suitors [View news story]
    " Exco produces nat gas in that shale play cheaper than everyone else."

    Encana is the lowest cost producer in Haynesville. EXCO cost is 7.5 per well and not economic at today's NG price

    "What shocks me the most is that BG group (their partner in haynesville), didn't participate in their contractually right to buy 50% of Exco's Chesapeake purchase there!"

    and you don't ask yourself, WHY?
    Nov 22 09:29 AM | Likes Like |Link to Comment
  • EXCO Resources: Why We Are No Longer Bulls [View article]
    i wish you all the best with your investment. And if it makes you happy to come back to this board IF the stock price goes up, then by all means's too short
    Nov 22 09:26 AM | Likes Like |Link to Comment
  • Calumet Specialty Products: No Fuel For Growth [View article]
    Hi Ed - I will try to answer questions in order

    "That may be true, but to make Calumet 'uninvestable' doesn't there need to be a firm expectation the distribution will be cut?"

    I don't think so. A firm can always use debt to maintain distribution. The question becomes is that sustainable and how levered is the company becoming. If a company has little debt and low leverage, i think a short term finance need for the dividend as OK. But if leverage is already large, then equity can suffer just as in an equity offering. CLMT is doing a $225mn note that will increase its leverage to 4 and lower its fixed coverage to 2.2 (assumptions below). The covenant on the debt has 1.75 on fixed coverage as a breech.

    "...then if the stock was to go sideways in the interim I'd still be picking up the best part of 10% a year wouldn't I?"

    The issue here is will the stock price go sideways. In effect, you are paying dividend out of shareholder equity, directly or through increased leverage. If the dividend yield remains the same, I would agree. But when shareholder equity declines and leverage increases, share price should go down and yield up to recognize the increased risk.

    "Perhaps the desire to 'avoid' a distribution cut will see Calumet trying as hard as possible to raise capital via debt rather than equity? "

    You are quite prescient. However, I see the need for 12mn new shares over next two years along with 100mn draw on their credit line to fund all their capex and their distributions. As I suggested above, that implies book value per share will go from 17.3 (trading at ~1.5x book) down to about $13-14. so if it stays here at $27, it would be trading at 2x, historically high for this MLP. So once again, I am not convince that stock will not drift lower into '14 - it depends on how forward looking market is and if there are no more hiccups (e.g., cost increase/delay in Montanna)

    The assumptions I am using are that crack spreads will be flat to Q3. Weil has 2-1-1 spreads down ~8% QTD but with futures showing seasonal increases, flat looks about right. But with WTI-brent, moving out, I am using a 40% improvement of CLMTs actual observed spread (sales vs cost on boe basis) from 6.77 in Q3 to 9.55 in Q4 and I am assuming 15mn for RINs in 2014 which is 1/2 the run rate of 1Q13. Still I see EBITDA as only 60-70mn and DCF coverage at 75% .

    So in a nutshell, it all depends on your risk-tolerance and whether you feel market will be concerned about growing leverage and/or dilution......


    Nov 21 10:05 AM | Likes Like |Link to Comment
  • A Closer Look At Boardwalk Pipeline Partners' Distributable Cash Flow As Of Q3 2013 [View article]
    as a follow up, i see the B shares if they were converted would have received 11.5mn. Coupled with the payment to GP (non IDR), would have been 131.5 in pay-out. Now for the IDRs, they made 8.8mn last quarter so with a multilple of 15 (8.8*4*15) = 528mn or 20.3 mn common units if converted at $26. So all in diluted distributions would have been 142mn on 102 DCF, so 70% coverage....with that coverage a 9-10% yield is prob required so back to low 20s.....
    Nov 20 03:03 PM | Likes Like |Link to Comment
  • A Closer Look At Boardwalk Pipeline Partners' Distributable Cash Flow As Of Q3 2013 [View article]
    An issue going forward is that the class B shares were converted after quarter end (on 10/9). They were limited to 30c distibutions but now are converted to common 1-1 with no restriction. Also, IDRs are at their top tier so any marginal increase in DCF gets split 50/50 with GP. This becomes particularly onerous when the distribution is not covered since it is funded with debt/equity and dilution is shouldered by the common (the 98%) even though they only get 50% on the margin. Coupled with Ron's analysis and the fact that Haynesville production is slowing makes me feel we will hit the low 20s again
    Nov 20 02:16 PM | 1 Like Like |Link to Comment
  • Enduro Royalty Trust: A Forecast Of Future Distributions [View article]
    hugh - those price assumptions are somewhat aggressive in my view as futures market is 80/4.5. Admittedly, everyone has their own view - i tend to like to stick closer to the market. The production so far in '13 has been disappointing vs their estimates. They assumed 2 Lost Tank wells were going to come on line - my understanding from McDep is that they have not as they await NG takeaway. That would help explain the production miss. If those wells come on line soon, + the two others in 1Q14, we should see stabilization in distribution. I am willing to go with another 3MMboes for more recovery in the Permian and consider Haynesville an option as I am unsure how many drill prospects they have left and at what NG price they are economic. As i said below, it has changed my view that $10-12 is an attractive price region.
    Nov 20 01:46 PM | 1 Like Like |Link to Comment
  • EXCO Resources: Why We Are No Longer Bulls [View article]
    Ron - since you are an investment advisor, would love to hear your reasons qualitative and or quantitative on why you find this a value stock?
    Nov 20 01:29 PM | 1 Like Like |Link to Comment
  • EXCO Resources: Why We Are No Longer Bulls [View article]
    e&p companies do not buy wells at PV-10
    Nov 20 01:24 PM | Likes Like |Link to Comment
  • Caterpillar releases three-month dealer stats [View news story]
    i thought power was suppose to save the day
    Nov 20 10:47 AM | Likes Like |Link to Comment
  • SandRidge Mississippian Trust II: Third Quarter Results Down, Units Oversold [View article]
    SD reduced drilling when oil was well over $100. SD is clearly worried about capex as quicker drilling would have accelerated the subs converting to common and saved them money on NPV...and lets not forget SD selling 1.15mn shares on 9/10. The Lime is a Lemon - well results are not good - I will trust this SA author:

    Sorry but this is a sad trust worth no more than 7.50 based on the IRRs for other trusts. Personally, I would look at NDRO which has better wells, upside, and priced reasonably. Or the more established names like DMLP, where its run by a seasoned professional, has a history of maintaining distributiuons, and has upside through acquisitions....sadly, SDR has none of these.....
    Nov 20 09:16 AM | Likes Like |Link to Comment
  • EXCO Resources: Why We Are No Longer Bulls [View article]
    i believe they said EBITDA will grow but it all depends on your definition of cash flow - e.g., does it include replenishment drilling?....their net interest in the wells drilled will provide 125mn in "cash flow" to XCO. But they will spend 100mn to fund drilling new wells (KKR supplying 300mn) and they will have to buyout KKRs interest in the wells from year-1 costing 200mn
    Nov 19 04:33 PM | Likes Like |Link to Comment
  • These MLPs Create Pay Days [View article]
    paydays? yeah for the underwriters and sponsors
    Nov 19 03:44 PM | Likes Like |Link to Comment
  • Enduro Royalty Trust: A Forecast Of Future Distributions [View article]
    after some more due diligence, I am willing to go with a higher valuation for NDRO akin to FA's best curve. It does appear to have some upside potential in Permian reserves and maybe in Haynesville if NG ever gets north of $5. So there are some options here. I've remodeled my type curve for the lost tank wells (4 i believe) coming on line as well as a modest uplift to reserves and see a $12 price reflecting about a 7% yield. This would be consistent with some of the other mature trusts as well as other publicly trading income vehicles (preferreds, pipeline MLPs, etc...) and also, at the secondary price of 13.85, that would have been 5.5% consistent with Enduro wanting to divest. So i don't see current price as "great" but it will probably help keep shares from major decline (usual caveats) - we nibbled a bit low 12s but would look to increase risk towards 10......good luck
    Nov 19 08:37 AM | Likes Like |Link to Comment
  • Bad day for the SandRidge trusts [View news story]
    just add "another" to the title and republish
    Nov 18 04:29 PM | 1 Like Like |Link to Comment