Marc Courtenay

Nibbling on Natural Gas, Concerned about Atlas Pipeline Partners

As a P.S.: I finally decided to sell my shares of APL on 9/25/09 and replaced that money with shares of EPD. Hope it works out and I'm glad I decided to wait until now.

Nibbling on Natural Gas, Concerned about Atlas Pipeline Partners

I hope you are right, but today there is a bloodbath today in APL on heavy volume. I hope it means some big players are accumulating for the next big run-up. On Yahoo! Finance, their daily interactive chart, there's a big block trade of 82,000 shares at 5.925 four minutes after the opening (9:34am EST) and most of the rest of the down volume for the day from that time has been smaller blocks but a heck of a lot of them. I still have my APL only because I'm betting (and believe me it is a gamble) that those 1 million shares that someone bought today under $6 a share might be worth more down the road. It might be a sucker's bet, so you'll have to figure this out for yourself if you, like me, decided to hold your shares. Let's also hope they resume their dividend payout, as that would help.


On Aug 23 10:47 PM Gary Klahr wrote:

> The big knock on APL had been its debt problem. Since that has been
> alleviated, and they are promising to start dividends again next
> year, I would THINK that there is much more upside at this price.
> APL was a good short in the past--but like C and BAC, now may be
> the time to BUY---when NO ONE wants it. (Who ever thought you could
> QUADRUPLE your $$ in C in 6 weeks or BAC in 3 months??)What fool
> was SELLING GE below 6 that day a few mos ago???

Nibbling on Natural Gas, Concerned about Atlas Pipeline Partners

Yes, I'm aware of the NAV premium, and yes, it does concern me. If UNG figures out a way to issue more shares and units, perhaps we will see some dilution, which might reduce the share price somewhat more in the weeks to come. Today UNG is up over 2% while natural gas is up 5%.


On Aug 23 11:02 AM basehitz wrote:

> Sub $3 NG. Tough to lay off, but a lot of questions.
>
> UNG is at 14% premium to NAV. So far, new units recently allowed
> by SEC have not been issued. Then there’s the potential CTFC new
> position limits. And finally, UNG managers are hedging potential
> new regulations by selling futures and buying swaps, which carries
> it’s own risk.
>
> NG defies many attempts to call a bottom and continues to drift lower.
>
>
> On storage capacity, I built an offline application to try to project
> future storage. Weekly updates from EIA are fed in, and the 3-week
> avg injection projected forward. It currently predicts peak storage
> of 3.789 Bcf as determined by EIA will be reached Oct 23rd.
>
> Weather.com doesn’t show any Atlantic storms currently. But it will
> get wild if one threatens the gulf.
>
> The contango remains ridiculous at 16% as of Friday. The roll period
> was complete Aug 18th, so I would have thought it would back off.
> Instead it ballooned from 12% the prior Friday.
>
> If the market corrects, typically energy moves with it.
>
> That’s a lot of moving parts.
>
> Last week I flipped GAZ a couple trades to avoid some of the above.
> Then they decided to stop issuing new shares also and their premium
> to NAV expanded to 7%. Also too high.

Nibbling on Natural Gas, Concerned about Atlas Pipeline Partners

Thanks Andy. Very useful insights and ideas.


On Aug 24 09:09 AM Andy1234 wrote:

> and just to comment.....this has helped me...both from an investing
> and trading stand point.
>
> Jesse Livermoore would let the move happen in the direction he thought
> it would move and then invest.....having immediate gains from an
> investment or trade is easier emotional wise.....even if you are
> right in the long term investment. Seeing those immediate gains confirms
> your choice.
>
> I use range contraction trading methods for trading AND investing
> entries. I also wait for confirmation on the move in the direction
> I think the stock is going to move and make my investment right then
> and there.
>
> For example....BQI is one stock I am watching that is about to break
> out to the upside.......if you see a powerful move upward (which
> is right there) we should see a large move upwards.

Nibbling on Natural Gas, Concerned about Atlas Pipeline Partners

Yes I did. Thanks for the clarification.


On Aug 23 11:22 AM john s. gordon wrote:

> i think the author means 2.50 per million btu/

Nibbling on Natural Gas, Concerned about Atlas Pipeline Partners

Thanks for the ideas and suggestions


On Aug 23 09:07 AM sligoo wrote:

> For safety in numbers AND dividends, check out TYY and FEN. This
> move also lets you avoid the onerous tax problems associated with
> owning master partnerships outright,e.g. APL.

Natural Gas Companies Increasingly Important

I haven't been able to follow Peyto Natural Gas for a quite a while. I do own my original shares and plan to hold them until I can do further research. If I come up with new conclusions I hope to let you know. In the meantime keep a close eye on their web site and company annoucements.


On Apr 06 03:19 PM dino33ca wrote:

> Mr. Courtenay,
>
> Are you not recommending Peyto Nat Gas fund any longer? Just curious,
> thanks for the great article.

Natural Gas Companies Increasingly Important

Thanks for your straight forward comments Skip. Go to their web site and read their 8-K and their presentation. My friend Richard Wendling Bearfactsspecialistrep... wrote the following that might be useful to you: 3) APL is carrying 1.5 Billion in debt on their balance sheet. While this is a major negative it is also a positive. APL had five major projects over the last several years related to pipelines and pumping stations, which caused that debt load. As the chart below indicates four of the five are now
completed (see their web site or email Richard for his charts at
comments@bearfactsspec...
The debt load can now be reduced.
4) APL has a current book value of $13.73 per share, which means that at its current price it is trading at 1/3 of its true value making its current stock price a steal.
5) APL has just agreed to a joint venture with Williams Company. Under the terms of the agreement they are to receive $90 million dollars up front, an additional $25 million in obligation rights and a 49% equity stake in any product produced in the Marcellus Shale project. This $115 million plus the moneys generated by the 49% equity stake will go directly to paying down debt. Couple this with the fact that they are selling two processing plants to the joint venture for $12 million each and you have $135 million immediately pared from your debt balance sheet which reduces it by 10%.
6) Couple that with the fact that earnings are expected to increase for the remainder of the year and well into 2010, (expected earnings of $600 million) the majority of which will be put against debt and their negative balance sheet becomes much more positive. The projected earnings for APL are listed at the top of the next column. Why is this chart important? Look at the last quarter of 2008, a terrible quarter for the markets yet APL’s consensus estimates were for $.35 and they generated $.66 nearly double estimates. If this holds true, and I expect it will and more than likely will increase then APL can be virtually debt free by the end of the year.
7) APL is also looking to sell two minor stakes it has to pay off the remaining debt currently owed without the earnings money listed above. If that happens 65% of that money listed above as earnings is returned to shareholders as dividends. $600 million time 65% equals 390 million divided by 50 million shares and that is a net return to us of $7.80 in dividends without any price appreciation in the issue.
Now having said all of this look at the chart (again, ask Richard to send it to you)
You will see that as the issue neared its lows in early November volume increased dramatically. It actually increased by 10 times daily average for those four plus months. Why? Simple, this specialist knew that oil and natural gas prices would rise again, he knew that APL’s build outs were near completion and that there were potential mergers and joint ventures on the horizon.
Knowing all of this he needed to accumulate as much stock as cheaply as possible. Since their were so few shares outstanding he needed a prolonged slump in oil and the markets to drive his issues price low enough to scare investors from the stock so he could accumulate those shares for his personal long term investment accounts.
Now as the chart above indicates the stock has been moving slowly higher. It has been moving along the current support/resistance green/orange lines drawn off of the gap at the $4.00 level. If I am correct in my expectations for this stock it will move up and close the next gap in the stocks price at the $7.60 level.
It can then move higher until it reaches its next level of technical overhead resistance, the green line at the $12.80 to $13.00 level. Depending on the severity of the increase in oil and natural gas prices in the coming months due to inflationary pressures the stock could move up to the $18.00 orange line before pausing. After that I expect it to breakout next year and move up to and through the next levels of resistance at the $50.00 range.
While many say I am overly optimistic in my judgments on where this issue will move to I actually believe that I am being conservative in my expectations.
With the way that the current president and his administration are spending money like “drunken sailors on leave” they are going to create massive inflation in the world. This inflation will raise commodity prices dramatically; oil, gas, natural gas, aluminum, precious metals and gold all will advance by leaps and bounds.



On Apr 05 03:27 PM Skip Olinger wrote:

> Marc,
> You are long on opinion and short on detail here. How much cash is
> APL getting from Williams to pay down their debt? Is not the goal
> to pay down debt to avoid covenant breech? I see no mention of that.
> How did you or your mentor come up with $400M for the sale of NOARK?
> What effect on Adj EBITDA will that sale have. NOARK is one of their
> few assets that generates revenue from fee or toll contracts so the
> sale further exposes the company to commodity risk. And, could you
> please enlighten us all as to why your favorite pick of all the NG
> transportation companies is APL? If you like transportation and
> distribution, why on Energy Transfer or Enterprise Products. They
> are bigger, not in financial peril. They make much more of their
> revenue from fee based contracts, not keepwell contracts. I have
> to be blunt here in the interest of trying to keep high quality analysis
> on SA; I don't care about your "feelings" about a company. I am interested
> in hard analysis as to why APL is now a deep value play with little
> downside risk and very large upside. I see nothing here that tells
> me how and when APL will raise sufficient capital to pay down debt
> to avoid default. It won't matter how much they earn if the bank
> defaults their loan. This is an interesting story so do some real
> analysis before you publish. There is no value in putting up a piece
> that tells readers to look at the company's powerpoint.

Atlas Pipeline: Hang in There

Thanks for your article and comments Tim. On more than twice the average volume this slaughter of APL has so much more to it than meets the eye. How do I know? By both the price movement of the share and the volume. Jumping Joe's comments and worries above could be part of it, and yes Bhakta, if APL can keep their cash flow to strong enough levels it should all work out.

Is a 20% Yield Sustainable? Look at Atlas Pipeline Partners

No, actually Chris must have copied and pasted his analysis directly from the company's public statement, a portion of which reads as follows:
In addition to cash flow related to ongoing operating revenues from which Atlas Pipeline is paying its quarterly distribution with coverage of 1.2x, the Partnership also generated $49 million of benefit from the following actions:

* The Partnership repurchased approximately $60 million in face amount of its Senior Notes in December 2008 for an aggregate purchase price of approximately $40 million, generating a gain of approximately $20 million;
* The Partnership entered into early settlement arrangements on approximately 13% of its commodity hedge contracts covering 2009 natural gas liquids (NGL) and condensate production volumes. The Partnership received approximately $19 million in net proceeds from these early settlements concluded in December 2008. The net proceeds from these settlements were used to reduce outstanding indebtedness; and,
* The Partnership recognized a $10.0 million benefit resulting from the early termination of certain derivative positions.

The Partnership also continues to consider additional strategic alternatives.

Eugene N. Dubay, Chief Executive Officer of the Partnership, stated, “The distribution of $0.38 per common unit comes despite the devastating and rapid decline in commodity prices, which were down approximately 60% from the previous quarter. We are hopeful that NGL prices (up approximately 50% from December 2008) will continue to recover, and that our unitholders may receive the benefit from such recovery.”


On Jan 29 07:17 AM rhino25 wrote:

> Dude, you basically copy and pasted most of your analysis from a
> Chris Mayers alert

Is a 20% Yield Sustainable? Look at Atlas Pipeline Partners

I couldn't agree with you more and I appreciate your caution. It is also been a good time to be accumulating UNG, which I have been doing at around $18.20 to $18.30, and I'm encouraged by today's natural gas market action. Hope you are doing well with your investments. These are very volatile markets indeed!


On Jan 29 08:56 AM max135 wrote:

> I think that they are so many high yield Natural Gas Plays out there.
> Be careful and own a basket of these rather than one.

Is a 20% Yield Sustainable? Look at Atlas Pipeline Partners

The debt issue with APL is a great underlying concern, but the hope is the cash flow will carry the debt. The balance sheet and income statement for AHD looks scary, and it wouldn't surprise me if management puts the whole thing up for sale and tries a merger. The price tells us it is 'high risk". Appreciate your comments and I hope the price of APL will be boosted in the future by a boosting of the payout. Modest, very careful exposure to APL seems appropriate as the higher risk portion of an income with growth portfolio.


On Jan 29 07:22 AM jpau wrote:

> Marc, I think the market has this thing just about priced correctly
> right now. I've been following Atlas since last year. ATN, LINE,
> BBEP, MWP - many of these fell in similar fashion, but it appears
> that those did a better job of price-hedging than APL. That's a bit
> disconcerting, but the price seems right for the risk. They have
> pretty significant debt too, and there was considerable worry about
> their debt covenants.
>
> That said, I picked some up yesterday because I agree with you that
> at the current price relative to book value, along with the payout
> percentage, it is too attractive to ignore. Makes me wonder if Klarman
> will add to his position this quarter, he also holds LINE and BBEP
> I think. Any thoughts on AHD? Their payout got crushed.