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Elliott Gue

 
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  • Recent MLP IPO LRR Energy Yields Nearly 10% At Current Prices [View article]
    Thanks for the comments. This illustrates precisely why I pay so much attention to IPOs of Master Limited Partnerships (MLPs), US Royalty Trusts and other income-paying securities. Websites like Yahoo Finance and most brokerage sites only show a company's actual historical payouts. To calculate yield, sometimes these payouts are annualized and sometimes they simply show the yield based on a single quarterly payout.

    In the case LRE, Yahoo Finance is showing an annualized payout of 0.928 which is based on their January 27 dividend of $0.232 annualized ($0.232 x 4 equals $0.928). But as Borderite points out that first dividend payout was based on just part of a quarter.

    This opens up a huge opportunity. If you look through the actual S-1 filings of LRE or other new IPOs with the SEC, they lay out precisely what they intend to pay. You can often pick up new IPOs offering very attractive yields long before the crowd realizes their full income potential. When the yield figure starts to show up correctly on other financial websites, interest in the security picks up.

    A classic case of this was when Seadrill (SDRL) listed in the US for the first time back in 2010. I recommended the stock at the time due in part to the quality of their fleet and to their intention to offer a double digit (at the time) yield. It took six to nine months before that yield started to show up on financial websites correctly. It was a great opportunity to get in.

    Disclosure: Long SDRL
    Mar 20, 2012. 11:42 AM | 3 Likes Like |Link to Comment
  • Teekay LNG Partners LP: Investors Overestimating Risk [View article]
    Thank you Don P. That is/was exactly my intent in the article. I actually regard TGP as a relatively low-risk MLP thanks to its long term charter coverage. But, it's yield is above average for the industry, which suggests that investors believe it's riskier than is actually the case.
    Mar 19, 2012. 07:10 PM | 1 Like Like |Link to Comment
  • Teekay LNG Partners LP: Investors Overestimating Risk [View article]
    LNG carriers aren't a bad neighborhood. As another commenter noted, you can't carry LNG on crude oil tankers and the supply of LNG carriers is tight. The orderbook for newbuild LNG carriers is also not sufficient to keep pace with demand over the next few years so I don't see a glut emerging near term.

    This is why LNG carrier dayrates have been setting new all-time record highs even as tanker rates plumb multi-year lows.
    Mar 19, 2012. 07:06 PM | 2 Likes Like |Link to Comment
  • Growth In Deepwater Drilling: Ensco [View article]
    Thanks for all of the great comments on this article. While I agree with some of the comments about Transocean (RIG) being a decent value here, the fact is that the company has been a laggard compared to names like Ensco (http://bit.ly/Gztvwv) and Seadrill (http://bit.ly/u1d6zb).

    Some of this underperformance is due to a "Macondo" discount but RIG has also had its share of operational issues including the cancellation of a contract in Malaysia due to rig issues and generally higher-than-expected rig downtime over the past few quarters. The company also recently suspended its dividend; RIG had paid out $0.79 per quarter over the past four quarters.

    I think RIG will perform reasonably well as the offshore contract drilling market tightens, particularly for deepwater rigs but I just prefer other names. My favourites are Seadrill (http://bit.ly/u1d6zb), a high-yield name I have written about repeatedly on Seeking Alpha over the past few years, Ensco (http://bit.ly/Gztvwv) as highlighted above and Pacific Drilling (http://bit.ly/GztvMR), a relatively new IPO. As one reader commented above, PACD has a couple of new drillships due to enter the market that I think will garner impressive dayrates.

    Disclosure: Long SDRL
    Mar 19, 2012. 07:01 PM | Likes Like |Link to Comment
  • Penn Virginia Resource Partners: Much To Like About This Low-Risk, 8 Percent Yielding LP [View article]
    Another point of differentiation is that NRP has more exposure to metallurgical coal (the type of coal used in steel-making). Met coal accounts for about 20% of reserves.

    Also, another coal MLP worth watching is Alliance Resource Partners (ARLP) and its General Partner, Alliance Holdings GP LP (AHGP). This firm has more exposure to the Illinois Basin. The IL Basin is interesting because it's mainly high sulfur coal, which has traditionally had a limited market. But, as more scrubbers are being installed on US coal plants the potential market for IL Basin coal is expanding.

    I am Long AHGP
    Mar 19, 2012. 06:40 PM | 1 Like Like |Link to Comment
  • Starved For Income: Where To Find Income In Today's Low Interest Rate Environment [View article]
    It's hard to argue with 30 consecutive quarterly distribution hikes. $EPD is just remarkably consistent
    Feb 29, 2012. 09:42 AM | 1 Like Like |Link to Comment
  • 4 Recent IPOs To Watch [View article]
    Thanks for the comment. Yes, you're quite right it's Noble Energy (NBL) not Noble Corporation (NE) I was referencing in the article. I just wrote up a piece on deepwater contract drillers so I guess I still had NE in my head.
    Feb 22, 2012. 08:46 PM | 1 Like Like |Link to Comment
  • Making Sense Of North America's Shale Oil And Gas Future [View article]
    Thanks for all the great comments. A few points:

    1. Yes, I believe that one of the plays on the US unconventional gas (and oil) boom is infrastructure -- the pipelines, processing plants and storage facilities needed to take gas from the field to the burner tip. In many cases, the companies or Master Limited Partnerships (MLPs) building these lines sign up producers as customers long before they begin construction. Fees charged don't depend on commodity prices and part of the fee structure is a capacity reservation charge that must be paid whether the pipe is actually used or not. A very stable, cash generative business that can back up impressive dividends/distributions.

    2. Be careful of the natural gas storage market. If storage facilities are booked under long-term deals and supported by capacity fees, the business can be solid. But demand for gas storage can also be driven by volatility in the natural gas market and the summer/winter price spread. For example, if prices tend to be low in summer and high in winter a company can purchase gas, store is and then sell it in a sort of seasonal arbitrage. Using futures these profits can actually be locked in. The boom in shale gas production has not only pushed prices lower but has also reduced volatility and seasonal variations in gas prices. The market is, in effect, permanently oversupplies. This has really hurt storage levered companies like PNG and NKA.

    3. US consumers aren't being ripped off in my view by the utilities or anyone else. In fact, quite the contrary, it's not widely appreciated just how good shale oil and gas production is for parts of the US economy. I went to the UK late last year and one of the stories dominating the airwaves was the fact that many customers were seeing massive increases in their electricity rates forcing people to take all sorts of measures to conserve power. Rates in some cases were up 30 or more percent over the past year due, in large part, to the soaring cost of natural gas in Europe. Meanwhile, across the Pond in the US electricity prices are actually falling.

    And, look at US-based chemicals companies like Eastman (EMN) and Dow (DOW). These firms are benefiting handsomely from the increased availability of natural gas liquids (NGLS) used in petrochemicals production. US chemical production capacity is being re-started and capacity expansions are underway because it's actually cheaper to produce certain chemicals in the US than it is in the Middle East.
    Feb 18, 2012. 05:46 PM | 3 Likes Like |Link to Comment
  • Going Deep: Oil Service Providers Should Benefit From Boom In Deepwater Drilling [View article]
    Thanks for the comment. I don't think you'll see dayrates collapse overnight. For the most part these deepwater and ultra-deepwater rigs are contracted for years into the future at more or less fixed rates.
    Feb 18, 2012. 05:27 PM | Likes Like |Link to Comment
  • Going Deep: Oil Service Providers Should Benefit From Boom In Deepwater Drilling [View article]
    Thanks for the comment. Industry insiders have been looking for deepwater activity to heat up this year but they did seem a bit surprised at how quickly it's happening. Some of these discoveries are quit recent though and may have sparked a change of sentiment.
    Feb 18, 2012. 05:25 PM | Likes Like |Link to Comment
  • Going Deep: Oil Service Providers Should Benefit From Boom In Deepwater Drilling [View article]
    Thanks for the comment. The rumors aren't at all unfounded in my view. After all Noble just signed a deepwater rig for $610,000 so $625,000 wouldn't be that much of a leap. Moreover, given just how few rigs are available in the deepwater/ultra-deepwater class, there's an obvious scarcity premium.
    Feb 18, 2012. 05:23 PM | Likes Like |Link to Comment
  • Going Deep: Oil Service Providers Should Benefit From Boom In Deepwater Drilling [View article]
    Thanks for the comment. Yes, clearly deepwater Brazil will be a major area of development over the next few years. One interesting point is that the geology of the finds in the Kwanza Basin offshore Angola is similar to the big Brazilian deepwater finds like Tupi. This is less surprising when you consider that 100's of millions of years ago when the continents fit together as a single landmass, these areas would have been adjacent. This is another reason producers are so excited about Angola's pre-salt potential.

    The big deepwater finds in Norway's Barent's Sea show that producers are moving deeper into the Arctic to find oil and gas.

    Finally, I would note that Statoil and Exxon announced a potential natural gas find in a deepwater block offshore Tanzania just last week.

    Activity is heating up.
    Feb 18, 2012. 05:21 PM | 1 Like Like |Link to Comment
  • The State Of Agricultural Commodities [View article]
    Thank you both for the interest. The website http://bit.ly/yzGDu8 has links to all my e-letters.

    And, if it helps, I lived in the UK for four years while doing my undergraduate and masters degrees.
    Feb 10, 2012. 01:20 PM | Likes Like |Link to Comment
  • Merger Madness To Continue In 2012 [View article]
    Absolutely a valid observation. The proposed acquisition of Minefinders (MFN) by Pan American Silver (PAAS) announced on January 23rd is proof that the consolidation you speak of is already underway.
    Feb 7, 2012. 10:03 AM | Likes Like |Link to Comment
  • The State Of Agricultural Commodities [View article]
    Thank you for all of the kind comments both about this article and Personal Finance.

    Agriculture is truly a fascinating area. I first started researching the space back in 2005 in preparation for my first book The Silk Road to Riches (focused on the rise of the emerging markets). There are some interesting parallels between the Agricultural Revolution of the 18th and 19th centuries and the current period.

    If you look at the Essay on Population first published by Thomas Malthus in 1798 he predicted that the Earth could not support the rising global population and would ultimately face famine and disease. The reason this did not happen is that farmers in places like Britain were able to dramatically increase their yields through measures such as crop rotation, proper fertilization and irrigation. The dramatic increase in yields and efficiency allowed the British population to expand to new highs even as the incidence of famine fell and the quantity of arable land declined. In addition, these improvements freed up more workers for other industries.

    We're now seeing the same trends underway in places like China -- a dramatic rise in population, evolving diets and a decline in arable land is forcing a new Agricultural Revolution. This will involve the adoption of international best-practices on fertilization and the use of more modern equipment like combines. In my view it will also mean ever more widespread adoption of genetically modified seeds. I know GM seeds are controversial but, at the end of the day, this technology can dramatically increase yields per acre and that's what's needed.

    There is a long list of investment implications. Certainly the fertilizer names mentioned in comments above would be on that list as would farm machinery companies like Deere (DE) and GM seed firms like Monsanto (http://bit.ly/xovs3u).

    Disclosure: I am long $MON and $DE
    Feb 7, 2012. 09:53 AM | 3 Likes Like |Link to Comment
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