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Philip Trinder

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  • A Closer Look At Plains All American Pipeline's Distributable Cash Flow As Of Q4 2013 [View article]
    rickevan,

    From page 22 of PAGP's IPO Prospectus:

    "Material tax consequences

    Although we were formed as a limited partnership, we will elect to be taxed as a corporation for U.S. federal income tax purposes. Distributions on the Class A shares will be treated as distributions on corporate stock for federal income tax purposes. No Schedule K-1s will be issued with respect to the Class A shares, but instead holders of Class A shares will receive a Form 1099 from us with respect to distributions received on the Class A shares. Like distributions on corporate stock, our distributions will only be treated as dividends to the extent of our current or accumulated earnings and profits (as computed for federal income tax purposes). Our initial acquisition of interests in AAP will result in deductions that we anticipate will offset a substantial portion of our taxable income for an extended period of time following closing. In addition, as the Existing Owners exchange their retained interests in AAP and Class B shares in us into our Class A shares in the future, we expect to benefit from additional tax deductions resulting from those exchanges, the amount of which will vary depending on the value of the Class A shares at the time of the exchange. For additional information relating to our exchangeable structure, please read 'Organizational Structure.'


    We estimate that for an extended period of time following the closing of this offering, which we estimate will include, at a minimum, each of the periods ending December 31, 2014, 2015 and 2016, none of the distributions paid to you should be treated as taxable dividend income under current existing federal tax regulations, but instead will be treated as a return of capital. Distributions not treated as taxable dividends will reduce your tax basis in your Class A shares, or will be taxable as capital gain to the extent they exceed your tax basis in your Class A shares."

    Source: http://1.usa.gov/1jGbrE6

    Best Regards,
    Phil
    Mar 27 12:00 PM | Likes Like |Link to Comment
  • A Closer Look At Plains All American Pipeline's Distributable Cash Flow As Of Q4 2013 [View article]
    Ron,

    You may want to look at the EV / EBITDA multiple for PAA on an adjusted basis and subtract the GP distributions from EBITDA. This adjustment would then make the EV / EBITDA multiple more comparable with EPD and MMP (since they no longer have the IDR burden).

    In addition one way to manage the IDR exposure for PAA investors is to also purchase PAGP (since it owns 2% economic interest and the IDRs for PAA). A quick rule of thumb would be to purchase at least the same dollar amount of PAGP so the combined position is ~50% is PAA and ~50% in PAGP so in aggregate the investment position is exposed to 100% of the forward growth of PAA's incremental distributable cash flow.

    Best Regards,
    Phil
    Mar 15 04:27 PM | 1 Like Like |Link to Comment
  • Magellan Midstream Partners: The Best MLP In America Is Trading At A Discount [View article]
    Adam,

    The "astounding distribution growth" chart from YCharts that is showing a 701.4% increase in MMP's quarterly distribution is dramatically incorrect.

    MMP Distribution History: http://bit.ly/11l0iCL

    If you click to see the full MMP distribution history you will see a footnote on the first distribution explaining that it was pro rated for the partial period that MMP was public right after its IPO. So the correct way to show the distribution growth is to use what the full quarterly distribution run rate was for its first publicly traded quarter. They show an annualized run rate of $0.525 for 1Q01, so the run rate for the quarter would be $0.525 divided by 4, which is $0.13125.

    The correct calculation for the lifetime total growth in MMP's quarterly distribution is then:

    4Q13 (just paid): $0.585

    compared to the correct starting point of

    1Q01 (full quarter effective distribution): $0.13125 (split adjusted)

    So the correct distribution chart would go from 100% up to 445.7% instead of the 701.4% that YCharts is showing (that is a huge difference).

    The best default assumption should be that every single YChart "Dividend % History" chart for energy MLPs is incorrect because of the energy MLPs' typical approach of pro rating the first public distribution. There are a few MLPs where the first distribution was not pro rated but that may be 2 or 3 of them (hence the logic behind the default assumption that the YChart data will always be wrong).

    How I Know I Am Correct

    Let's go back to MMP's distribution history on its website: http://bit.ly/11l0iCL

    On that page there is a column to the right called "Increase since IPO" and it is showing that the last distribution represented a "346%" increase since the IPO. This number matches up to my calculation if you round the increase, 445.7% minus 100% starting point to calculate the increase equals 345.7% or 346%.

    Best Regards,
    Phil
    Mar 12 01:47 PM | 3 Likes Like |Link to Comment
  • Calumet Specialty Product Partners: Do The 2 Recent Acquisitions Threaten The Distribution? [View article]
    Doug makes a good point. Today CLMT filed a Prospectus Supplement to allow them to issue up to $300MM of LP units at their convenience.

    Here's the filing: http://1.usa.gov/1fq56i5
    Mar 11 04:07 PM | Likes Like |Link to Comment
  • Calumet Specialty Product Partners: Do The 2 Recent Acquisitions Threaten The Distribution? [View article]
    mike2915,

    You have an interesting perspective. Back when I was long CLMT I had all of the quarterly financial history analyzed since their IPO and actually used the trends leading up to the prior distribution cut as a guide for myself. When I started to sense their financial performance was turning in a similar manner, I used that historical context as the basis to fully exit my CLMT exposure by May 10, 2013.

    While it is true that they have not reduced their distribution again, I remain very happy with my approach to and the outcome of my exit decision.

    Best Regards,
    Phil
    Mar 11 04:02 PM | 1 Like Like |Link to Comment
  • Calumet Specialty Product Partners: Do The 2 Recent Acquisitions Threaten The Distribution? [View article]
    Adam,

    No problem, I agree it won't be a perfect match but it seems like a good way to try and benchmark the company against itself when trying to determine possible forward actions (history doesn't repeat but sometimes it rhymes).

    The key may be how their financials looked for the last three quarters of 2007 and the first quarter of 2008. I have a chart that shows some of that historical CLMT timing here: http://bit.ly/S7JYkj

    Best Regards,
    Phil
    Mar 11 11:05 AM | Likes Like |Link to Comment
  • Calumet Specialty Product Partners: Do The 2 Recent Acquisitions Threaten The Distribution? [View article]
    Adam,

    Have you looked at the conditions in CLMT's past that led to them reducing their distributions and their financial metrics at that time?

    Best Regards,
    Phil
    Mar 11 10:06 AM | 1 Like Like |Link to Comment
  • Weekly Intelligence For Master Limited Partnership Investors [View article]
    I got a good chuckle out of the price action in XTXI on Friday after the "news" came out that it was going to be removed from the Russell 2000.
    Mar 9 05:33 PM | Likes Like |Link to Comment
  • Plains All American: A High-Quality, 4.5% Yielding MLP For Serious Long-Term Investors [View article]
    gfmn2000,

    Your annualized yield estimate for PAGP is incorrect. Here is the press release announcing their first distribution: http://bit.ly/1dCHRQy

    To determine if PAGP's valuation is reasonable you need to compare its valuation to other comparable publicly traded General Partners and you could maybe expand the comp group and use some of the very high growth rate MLPs (so distribution growth expectations above 20%). Last October when PAGP was trading below its IPO price of $22 it was a great deal.

    For part of your due diligence you can see more of PAGP's growth history in the IPO Prospectus on page 5: http://1.usa.gov/1jGbrE6

    Achilles Research,

    What comp group would you use for evaluating PAGP and at what price do you think PAGP is a reasonable value?

    Best Regards,
    Phil
    Mar 8 01:02 PM | 1 Like Like |Link to Comment
  • Time To Buy Argent (And A 17% Yield) Before Earnings [View article]
    MLP Trader,

    You're welcome. I agree and always try and keep an eye on everyone as well. It's sort of like poker, I'm always trying to figure out what everyone else at the poker table is thinking about their hands...

    Best Regards,
    Phil
    Mar 7 07:11 PM | 1 Like Like |Link to Comment
  • Plains All American: A High-Quality, 4.5% Yielding MLP For Serious Long-Term Investors [View article]
    Rohrshack,

    No need to assume, the IPO Prospectus has all the answers, here is some relevant text starting from the bottom of page 2:

    "In general, distributions on the Class A shares will be treated as distributions on corporate stock for federal income tax purposes. No Schedule K-1s will be issued with respect to the Class A shares, but instead holders of Class A shares will receive a Form 1099 from us with respect to distributions received on the Class A shares. We anticipate that available deductions will offset our taxable income for an extended period of time following the closing of this offering. During this period, which we estimate will include, at a minimum, each of the periods ending December 31, 2014, 2015 and 2016, none of the distributions paid to you should be treated as taxable dividend income under current existing federal tax regulations, but instead will be treated as a return of capital."


    Source: http://1.usa.gov/1jGbrE6

    Best Regards,
    Phil
    Mar 7 07:03 PM | Likes Like |Link to Comment
  • Time To Buy Argent (And A 17% Yield) Before Earnings [View article]
    Hey Guys,

    Here's some quick background and Corporate Finance 101 on the short position, do you notice how it shows up in November of last year and was zero prior to that time?

    Do you know why that short position started back then?

    Here's why: http://bit.ly/1f7ANfZ

    So the Convertible Debenture offering is the reason for the start of the short position in the shares, why?

    Some buyers of convertible securities try and improve the risk adjusted return of their convert position by shorting some ratio of the underlying stock. Here's an explanation of Convertible Arbitrage as some general background: http://bit.ly/1f7AOQM

    I've noticed a general trend on SA that everyone seems to think that any time they see a short position that it is bad and that the people who are short are evil and manipulating stock prices and should be punished, etc., etc. For those of you long Argent that perspective is incorrect. Why?

    Those Convert Arb guys who bought the Argent Convertible Debentures last year represent increased demand for that piece of paper, their increased demand for it helped to improve the pricing for Argent (as in the coupon on that convertible security would have been higher than the 6.5% they achieved in their offering if there were no Convert Arb funds). So that short position that you see in the chart in the article is a benefit to Argent. Some of those holders of the convert may also be covering their short position down here (i.e. pent up buying demand for the stock) with the general plan of putting their short position back on at higher prices (further managing/enhancing their total risk adjusted return).

    Whenever you are looking at a company that has a convertible security on its balance sheet you should expect to see some type of short position in the stock thanks to the Convert Arbs who help improve the pricing on convertible securities.

    Best Regards,
    Phil
    Mar 7 02:03 PM | 6 Likes Like |Link to Comment
  • Plains All American: A High-Quality, 4.5% Yielding MLP For Serious Long-Term Investors [View article]
    Achilles Research,

    Thank you for the response. Yes I agree and actually prefer PAA to KMP because PAA is focused more on the Crude side of the business as opposed to KMP which is more natural gas oriented (yes KMP contains a variety of assets but for big picture purposes I group them in the "Natural Gas & NGL Pipeline Segment").

    PAGP is a "Pure GP" entity because it's only asset is a share of the General Partner's 2% economic interest and the Full Incentive Distribution Rights ("IDRs") in PAA. Anyone who owns PAA units should naturally also own PAGP Class A Shares (for all the super technical readers, yes PAGP is taxed as a C-Corp and provides a 1099-DIV so you can hold it any type of account including an IRA, they used an Up C-Corp structure for the IPO, here's the prospectus: http://1.usa.gov/1jGbrE6).

    How much PAGP should PAA investors own?

    I am going to say something now that seems really obvious to me so if it seems over simplified and everyone is already doing this I apologize in advance. For every $1 you have invested in PAA you should at a minimum have at least $1 dollar invested in PAGP such that half of your combined position is in PAA and at least half is in PAGP (a 50%/50% split). This way your combined position is matched up to the top tier of the IDRs that PAGP owns because for every incremental dollar of distributable cash flow that PAA generates 50% of it is going to go to PAGP so your combined PAA/PAGP position is now fully exposed to 100% of the growth in PAA's distributable cash flow. Obvious right?

    Also here is the answer to the question in my earlier comment, in Greg Armstrong's own words:

    "Using these essentially baseline type forecasts we are targeting 10% distribution growth for PAA in 2014 while maintaining a healthy distribution coverage of approximately 110% which will result in approximately $140 million of cash retained in excess of distributions. As a result of PAA’s distribution growth as well as anticipated increases in the peak number of PAA common units outstanding, we estimate PAGP’s distribution growth will be 25% or more in 2014 excluding the impact of meaningful acquisitions."

    Source: http://seekingalpha.co...

    Welcome to the MLP game.

    Best Regards,
    Phil
    Mar 7 11:31 AM | 2 Likes Like |Link to Comment
  • QR Energy: The Buyout Of The General Partner Is A Big Deal [View article]
    Pablomike,

    The info can be found beginning on pages 100-105 of the IPO Prospectus:

    http://1.usa.gov/1ieENKi

    They also included Hypothetical Management Incentive Fee and Conversion Calculations in that section for the Prospectus.

    Best Regards,
    Phil
    Mar 6 05:17 PM | Likes Like |Link to Comment
  • Plains All American: A High-Quality, 4.5% Yielding MLP For Serious Long-Term Investors [View article]
    Achilles Research,

    In your article you point out that ETE as the GP has substantially outperformed one of its underlying MLPs ETP, given your bullish view on PAA, are you even more bullish on Plains GP Holdings, LP (PAGP)?

    When PAA grows its distribution 10% over the next year, how much does the distribution grow at PAGP?

    Best Regards,
    Phil
    Mar 6 02:27 PM | 3 Likes Like |Link to Comment
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