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Ray Merola  

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  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part III [View article]
    beaux

    You bring up an excellent point. ETE is heading towards a pure GP play. Management has stated this intent. Once complete, the assets should largely be dropped into the LPs, and ETE will "up feed" from the assets through IDRs and direct ownership interests.

    Once complete, it does change the balance sheet calculus; putting less pressure on ETE and really leveraging the balance sheets (and cash flows) of the affiliated MLPs.
    Jun 27, 2015. 07:33 PM | 2 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part III [View article]
    The gulf coast LNG facility you mentioned is called Lake Charles LNG. It's referenced in the article, and owned by Energy Transfer. It's anchored by a long-term fee-based arrangement whereby Energy Transfer constructs and runs the operation. BG (purchase pending by Royal Dutch Shell) is the counter-party. BG guarantees payments for the facility and its operation. Lake Charles LNG may be supplemented by other Energy Transfer assets, including Trunkline. It's an outstanding deal for ETE.

    Sunoco Logistics has NG pipelines that run from the Marcellus formation to Marcus Hook. Additional SXL pipelines to transport NG are on the table. An export LNG facility is to be operated at Marcus Hook. Williams has interests in the same region, and these could compliment those of Energy Transfer, but that merger is far from a done deal.

    The U.S. has an oversupply of natural gas due to recent production spurred on by frac activity. Energy Transfer (and affiliate SXL) wants to be a big gun. I'm not sure Williams is necessary to be a big gun, but a combo arrangement would certainly remove one sizable competitor.

    Jun 27, 2015. 09:15 AM | 3 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part III [View article]
    Thank you, darnoc

    KMI has now converted to a C-Corp. A quick check indicates the balance sheet is sound. A more thorough analysis is recommended. ETE has a hell-bent growth M.O. that I've not seen in many others. The challenge will be not biting off more than the management team can handle.

    So far, so good.
    Jun 26, 2015. 10:46 PM | 2 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part III [View article]
    miriam

    I acknowledged your comment, but it became lodged several comments above your original post. You will see it timestamped 6.53 pm.
    Jun 26, 2015. 07:01 PM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part III [View article]
    Both are fine companies. I believe KMI and ETE are the best-managed in the business.
    Jun 26, 2015. 06:56 PM | Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part III [View article]
    thank you, uncle pie
    Jun 26, 2015. 06:53 PM | Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part III [View article]
    Thank you for the kind words, miriam ledwith

    I am not familiar with CPK, but I mentioned to another reader that I believe Kelcy Warren will continue to go for any deal that will grow the business and generate cash. The forays into retail marketing, refining, etc. are proof the playing field is not constrained by the usual midstream assets.
    Jun 26, 2015. 06:53 PM | Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part III [View article]
    I truly believe Kelcy Warren will not rest until Energy Transfer becomes the biggest and best energy MLP in the space. Every time I think he's done and will "digest" M&A activity, the company goes out and does another deal.

    Generally, I'd be concerned about "too big, too fast," but I'm willing to go for the ride for 2 reasons: Warren has surrounded himself with some of the best and brightest in the business, and the company has demonstrated the ability to bring major projects and acquisitions in "on time and on budget."

    If we look at the management for new businesses like retail marketing, products distribution, etc. we find senior management stepping back and letting the acquired businesses run their show.......and get results.

    So back to your question:

    Yes, I believe ETE / ETP will continue to seek big deals: major business M&A and asset purchases.
    Jun 26, 2015. 06:50 PM | 3 Likes Like |Link to Comment
  • International Paper: A Cyclical With 2 Big Catalysts [View article]
    nicholas

    Thanks for sharing details of your initial purchase.

    Long-term, IP is a solid choice. I was disappointed, and even a little surprised the IRS ruled against paper and packaging companies spinning off domestic mills into a MLP structure. This tempered my forward view. In addition, there's some current pressure on West Coast containerboard pricing, that may or may not mean anything.

    The Ilim JV is still a buried asset that I believe will reap dividends going forward.

    All in, I plan to equal weight my International Paper investment, but not overweight it. I've owned shares since 2009-10, but purchased some additional on the MLP expectations. I may offload these, but given the good cash flow and dividend, I'm in no rush.
    Jun 24, 2015. 05:20 PM | 1 Like Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part I [View article]
    Thank you for the very kind words, Joe. All the best.
    Jun 24, 2015. 07:45 AM | Likes Like |Link to Comment
  • Is Now The Time To Jump Into United Rentals? [View article]
    That's what makes a market, Joey G.
    Jun 23, 2015. 03:33 PM | 1 Like Like |Link to Comment
  • Wells Fargo Is Broadly Meeting Growth Projections; Can It Hit $60 Before The Year Is Out? [View article]
    Just in the way of data, during the 10 year period 1996 to 2007 (immediately prior to the 2008-09 financial crisis) Wells Fargo stock commanded an average 17x P/E ratio. The annual EPS growth rate during the same period was 11%.

    Coming out of the crisis through 2014, the average P/E has been 13x. EPS grew at 25% a year across the same time frame, though I believe going forward we will see WFC show considerably lower growth.

    The current P/E is ~14x.

    Does that support or question the notion of continued multiple expansion from here?

    Jun 23, 2015. 08:26 AM | Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part II [View article]
    Thank you for the encouragement, karlfigg

    Re BHI acquisition hurdles: there's nothing on the radar screen, but it's like a real estate transaction, nothing is done until you're at the closing table and the other guys has the check in hand. I do not believe there is finality on what Halliburton must divest to satisfy regulators. However, my view is Halliburton's desire to get the deal done and the $3.5 billion penalty for failing to complete the acquisition will be enough motivation to see it through.

    My general rule for managing gains (a high-grade problem) is to sell about about 25% of my shares if I have a 25% profit. The idea is to take a little off the table and avoid (at all costs) a "round trip." After distributing shares, I'd consider repurchasing these at lower prices if the underlying long-term investment thesis remains intact; and the security is a "core" holding.

    There are cases where I break my own rule: but not too often.

    Hope that helps.
    Jun 18, 2015. 10:59 AM | Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part II [View article]
    hogie

    I believe the merger will close under the current terms.

    When the deal was announced, the deal valued BHI at ~$78. The transaction formula now placed the value of BHI shares at ~$70. Currently, BHI stock has a market price of $63.81.

    An unknown is what assets Halliburton must sell to satisfy regulators, and what price these will fetch.
    Jun 18, 2015. 08:40 AM | 2 Likes Like |Link to Comment
  • Wading Into The Oil Patch? Focus On The Balance Sheet - Part II [View article]
    Thank you for the kind words, Mr. Ogilvie
    Jun 17, 2015. 11:35 PM | Likes Like |Link to Comment
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