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Philip Trinder  

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  • Regency Energy Partners: Dividends And Value [View article]
    Kelvin,

    The Capital IQ charts that you are showing in your article are incorrect. You are showing a distribution yield for 2010 of 0.0% in the first chart and then showing that RGP paid ~$200 million of distributions in the second chart.

    Here is the actual distribution history per unit on RGP's website: http://bit.ly/1CCyxXJ

    A good starting assumption is probably that Capital IQ data is incorrect and that you need to verify it from another source (preferably company SEC filings) before using it.

    Best Regards,
    Phil
    Feb 16, 2015. 11:48 PM | 2 Likes Like |Link to Comment
  • Little LRR Energy Has Big Hedges, Strong Prospects [View article]
    AW,

    The 1Q15 survey results were posted today.


    Link: http://bit.ly/1juwyLe

    Best Regards,
    Phil
    Feb 9, 2015. 10:23 PM | 2 Likes Like |Link to Comment
  • Little LRR Energy Has Big Hedges, Strong Prospects [View article]
    AW,

    You're welcome. The banks actually use the full economic reserve life of a company's reserves when determining the Borrowing Base, although admittedly the out years have less and less of an impact on the PV9 value (it used to be PV10). The banks will also limit the amount of non Proved Developed Producing value and cash flow that they use to determine the Borrowing Base. Something else to keep in mind is the "Cap" number shown on page 1 of the survey. The "Cap" amount, so the averages of $76.91 and $4.53 in the file I linked to, is the maximum future commodity price that will be used in the Borrowing Base model. And of course they also take into account all of the location pricing differentials for all of the specific company fields. Without the actual full non-public company engineering information estimating the Borrowing Base will have a very large margin of error, but still, the expected reduction in the lenders' price decks will put pressure on the Borrowing Base calculations.

    I'll try to keep an eye out for the next Macquarie Tristone Lender Survey for 1Q 2015.

    Best Regards,
    Phil
    Feb 6, 2015. 12:20 PM | 3 Likes Like |Link to Comment
  • Little LRR Energy Has Big Hedges, Strong Prospects [View article]
    AW,

    Just in case you want to get way down in the weeds, here's a link to the original Credit Agreement (see Mandatory Prepayments on page 41 for some of the language governing a Borrowing Base shortfall, 6 month cure period etc., see also Section 9.04 on page 79 which basically says no equity distributions while there is a Borrowing Base shortfall): http://1.usa.gov/1LRNJpn

    Here's a link to the most recent Credit Agreement Amendment from last fall: http://1.usa.gov/1LRNJWk

    And here's a link to the Energy Lender Price Survey for 4Q2014 that Macquarie Tristone publishes: http://bit.ly/1LRNJWq

    Note how high the average Base Case price deck is for the 39 Energy Lenders in the survey with a 2015 average WTI price of $77.21 and 2015 Nat Gas at $3.69. You can check the bank group for LRE and see that most or all of them are included in this survey. These were the general price levels used to give LRE the $260MM Borrowing Base last fall.

    Those bank price decks are going to have to come down substantially given the large downward move in both oil and natural gas prices. Yes, LRE has some hedging and the bank group does take that into account when determining the Borrowing Base; however, there is still a substantial amount of unhedged production over LRE's entire reserve life that is not hedged and thus solely dependent upon the Lender Price Decks that are used for the Borrowing Base Redetermination. The longer the Reserve Life Index (Total Proved Reserves divided by Production) is for an E&P Company the more the Borrowing Base will be impacted by changes in the Lender Price Decks because more of the production occurs in later years and the hedging is typically only in the first 3 to 5 years. LRE has a Reserve Life Index of ~13.6 "years" (which means a large amount of production occurs after the hedges are gone).

    The other way to look at the hedging chart from LRE is how much production is directly exposed to spot commodity prices / bank price deck assumptions?

    2015: 19%
    2016: 36%
    2017: 44%
    2018: 59%
    2019+: 100%

    Even with their hedges it seems likely that LRE's Borrowing Base will have to come down and if the new Borrowing Base is lower than the current outstanding amount then the May distribution is going to be zero. LRE also already has a Second Lien tranche of debt behind its Revolver so maybe they could increase that more expensive source of liquidity to try and keep within their Borrowing Base but either way their liquidity is going to be strained come April (or possibly sooner if the bank group calls for an Interim Redetermination). Also the increase in a Second Lien Tranche is going to reduce the Borrowing Base so would only be helpful if the Borrowing Base goes down by a smaller amount than the increase in the Second Lien Tranche.

    Given LRE's smaller comparative size in the Upstream MLP space I am extremely concerned about their liquidity. They may have to start thinking about using some much more expensive Mezzanine type of financing if their Borrowing Base liquidity goes away. Also if they are in a Borrowing Base shortfall then it become difficult for them to have enough cash flow to spend on "Maintenance Capex" since they have to pay down the Revolver debt every month.

    The Spring Borrowing Base redeterminations are going to be very difficult for all of the Upstream MLPs that have more than 80% of their Borrowing Bases outstanding.

    Best Regards,
    Phil
    Feb 5, 2015. 07:03 PM | 3 Likes Like |Link to Comment
  • Little LRR Energy Has Big Hedges, Strong Prospects [View article]
    Alpha Wolf,

    Have you looked at the terms and conditions of their Revolving Credit Facility? You can typically find a copy of the full Credit Agreement as an attachment to an SEC filing.

    If they have a Borrowing Base shortfall at the April determination do they have a 6 month cure period and if so, during that time will the equity distributions be cut to zero?

    Best Regards,
    Phil
    Feb 5, 2015. 03:31 PM | 2 Likes Like |Link to Comment
  • NuStar Continues To Twinkle, And Will Likely Beam Down Increased Distributions In 2015 [View article]
    smurf,

    Both NS and NSH send a K-1 each year.

    NS: http://bit.ly/1CvBifY

    NSH: http://bit.ly/1CvBk7K

    It is the tax treatment that a company elects that determines the tax form each year, so just because a company is an "LLC" that does not mean that it automatically sends a 1099-DIV. The same also holds true for "LPs" just because it is called an "LP" that does not mean that it automatically sends a K-1. The LP can elect to be treated as a C-Corp for U.S. Tax purposes and send a 1099-DIV instead (for example, many of the shipping MLPs send 1099-DIVs).

    If NS continues to improve its operations and can then start to increase its distributions that means that NSH will begin increasing its distributions as well. The Incentive Distribution Rights that NSH holds for NS have a top tier level of 25% (compared to the typical 50% level at many other MLPs). In total NSH owns the 2% GP interest in NS with the Incentive Distribution Rights and about 12.9% of the NS LP units.

    See page 4 of the UBS Jan 15 presentation for the complete structure: http://bit.ly/1z9YCZq

    Best Regards,
    Phil
    Feb 4, 2015. 12:59 PM | 6 Likes Like |Link to Comment
  • Ferrellgas Partners: Here's Why I'm Staying Long On This MLP And Its 8.13% Yield [View article]
    frichards72,

    Ferrellgas Partners, LP had its IPO on June 27, 1994, here is a link to the IPO Prospectus: http://1.usa.gov/1yCKVTJ

    Best Regards,
    Phil
    Feb 3, 2015. 03:08 PM | Likes Like |Link to Comment
  • Plains All American Pipeline: A Risky Play In A Struggling Industry [View article]
    grox01,

    Please see slide 26 in the PAA presentation found here: http://bit.ly/1yLnRWq;I=

    Cash flow for 2014 is expected to come in lower than 2013 due to the strong performance of the Supply & Logistics segment in 2013 (thanks to favorable market conditions for PAA like very wide differentials for crude oil prices across various regions in the U.S.). Cash flow for 2015 is expected to be higher than 2014.

    Best Regards,
    Phil
    Jan 27, 2015. 12:17 PM | Likes Like |Link to Comment
  • Plains All American Pipeline: A Risky Play In A Struggling Industry [View article]
    grox01,

    Are you referring to PAA's S&P Debt Ratings? If so, S&P upgraded its ratings for PAA on 12/4/14 and now rates PAA BBB+ with a Stable outlook, which makes PAA tied for the best debt ratings within the MLP universe.

    Here's the text:

    December 4, 2014 Standard & Poor's Ratings Services said today it raised its corporate credit rating on Houston, Texas-based Plains All American Pipeline L.P. (NYSE: PAA) to 'BBB+' from 'BBB'. The outlook is stable. We also affirmed the short-term rating of 'A-2'. At the same time, we assigned our 'BBB+' issue-level rating to Plains' proposed senior unsecured notes.

    Plains will use net note proceeds to repay outstanding borrowings under its commercial paper program (a portion of which went toward funding the BridgeTex acquisition) and for general partnership purposes. As of Sept. 30, 2014, Plains had about $8.6 billion of balance-sheet debt.

    The rating action reflects Plains' steadily growing size and asset diversity, while maintaining supportive financial policies and favorable credit measures compared with those of peers. The partnership has steadily increased its scale and enhanced its geographic footprint through organic capital spending projects and acquisitions that have been closely aligned with its core competencies. Plains' existing assets are well positioned to benefit from ongoing increases in crude oil production, volatility in crude oil prices, and regional supply and demand imbalances and crude oil price differentials.

    "Furthermore, we expect Plains' credit measures to be largely unaffected by lower crude oil prices, and that solid volume flows, volatile crude oil prices, appropriate risk management, and conservative funding of its capital spending program to continue to drive strong financial performance," said Standard & Poor's credit analyst Michael Grande.

    We base Plains' ratings on a "strong" business risk profile and "significant" financial risk profile.

    The stable outlook on Plains reflects our belief that the partnership will continue to be a disciplined operator and maintain credit measures appropriate for the rating, including adjusted debt to EBITDA of between 3.5x and 4x through the economic cycle.

    Source: http://bit.ly/1yLfN86

    Best Regards,
    Phil
    Jan 27, 2015. 10:56 AM | Likes Like |Link to Comment
  • 4 Things To Consider For Linn Energy As Uncertainty Rises [View article]
    adecinvestor,

    I don't look at PWE so don't really have a fully formed opinion but my quick 2 cents is that I am surprised that they didn't cut their dividend to zero back on December 17 when they cut it to $0.03 per quarter (down ~79% from $0.14).

    Press Release: http://bit.ly/1ySMyio

    Also just in case there is some confusion on my comment about LINE, I don't think the CFO took out a margin loan to buy additional units over time. He was initially awarded 343,364 units back at the IPO.

    IPO Prospectus (see page 107): http://1.usa.gov/1ySMAH9

    And he has likely been awarded additional units since that time as a part of his compensation package(s). There may be some open market purchases and you can feel free to go and look through the filings if you want to see exactly what happened. My assumption is that he wanted to generate some liquidity so pledged some (or maybe all) of his LINE units in order to receive a loan. This loan then falls under the "Margin Loan" rules and regulations.

    I would also venture to guess that the loan was provided by RBC Capital Markets because that is where Kolja was an Energy Investment Banker before he jumped ship to become the CFO of LINE. RBC was also the Left Book-Running Manager (the one that is running the deal) on the LINE IPO back in 2006 (you can see it on the front cover of the Prospectus I linked to above).

    And to add insult to injury, when you sell units in an investment that generates a K-1 tax form, the entity will view your sale on a First In First Out (FIFO) basis for your K-1 for that year. So that means that the units that Kolja just had liquidated are going to be from those first units he received back in 2006. If he was awarded those units for zero cost back then, he is going to have a long term capital gain tax bill on the entire amount of that $2.2 million of value that was sold. Not fun.

    Best Regards,
    Phil
    Jan 23, 2015. 01:53 PM | 3 Likes Like |Link to Comment
  • 4 Things To Consider For Linn Energy As Uncertainty Rises [View article]
    All,

    Just a heads up that Kolja Rockov (CFO), recently had to sell about 47% of his LINE unit position to meet a margin call.

    Here's the filing: http://bit.ly/1APFNw9

    "Units sold involuntarily. These units were held as collateral for a loan and were sold as a result of a decline in the Issuer's unit price."

    Oof, that has to hurt, I feel bad for him.
    Please never forget that Margin Kills.

    Best Regards,
    Phil
    Jan 21, 2015. 06:08 PM | 5 Likes Like |Link to Comment
  • The New Normal For Oil? [View article]
    Are all the tankers in the patio picture sitting empty?
    Jan 14, 2015. 06:11 PM | Likes Like |Link to Comment
  • Linn Energy Will Face Issues In The Short Term [View article]
    rlp2451,

    Just a heads up that the data in the table in the link you provided is actually showing something different than your statement:

    "below $20 from 1980-1990"

    Prices Shown in the Data Table:

    1980: $21.59
    1981: $31.77
    1982: $28.52
    1983: $26.19
    1984: $25.88
    1985: $24.09
    1986-1989: Collapse in 1986 and then those years were all below $16

    The graph in that link does not match up with the data table above it.

    Overall though I agree, the market can stay irrational longer than we can all stay solvent. Also another data point for everyone to notice in the data table is that the oil price in 1985 was $24.09 and it then collapsed to average $12.51 for 1986, which was a delcine of ~48% (sound familliar). The oil price in the data table does not get back above $24 until the year 2000 so 15 years later...
    Best Regards,
    Phil
    Jan 9, 2015. 01:38 PM | 2 Likes Like |Link to Comment
  • BreitBurn Energy Partners: Is The 30% Yield Sustainable? [View article]
    Steve,

    I'd ask your tax preparer or the tax preparation software company that you use, i.e. I think TurboTax has a Help area where you can ask questions.

    Best Regards,
    Phil
    Dec 31, 2014. 01:41 PM | Likes Like |Link to Comment
  • BreitBurn Energy Partners: Is The 30% Yield Sustainable? [View article]
    Steve,

    Here's a link to a search of the IRS website, the search is for "Passive Capital Losses":

    http://1.usa.gov/1B2GJkg

    Investments that generate a K-1 tax form are governed by the "Passive Activity Loss rules" and yes that also includes capital losses after adjusting for changes in tax basis. I think the big picture concept is that you are treated as a "passive" participant / partner in the business that sends you the K-1 so the "Passive Activity Loss rules" are applied.

    Best Regards,
    Phil
    Dec 30, 2014. 05:40 PM | Likes Like |Link to Comment
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