The problem I run into is that risk management activities encompass many kinds of items, including:
(i) Net changes in fair value of derivatives (ii) Amortization of net losses related to monetization of derivative instruments (iii) Currency hedges and valuations (iv) Unrealized gains on non-hedged interest rate derivatives (v) Unrealized (gains) losses on commodity risk management activities (vi) (Gains) losses on non-hedged interest rate derivatives (vii) Proceeds from termination of interest rate derivatives
For example, gains or losses on non-hedged interest rate derivatives could reflect floating-to-fixed swaps used to hedge interest rates associated with anticipated note issuances. I would not consider this a sustainable item and have not yet developed a methodology for reliably differentiating between the various risk management items.Therefore I exclude the from my analysis at this point. An investor adopting a different approach can easily use my tables to incorporate risk management activies into the definition of sustainable DCF.
A Closer Look At Energy Transfer Partners' Distributable Cash Flow As Of Q1 2013 [View article]
In the case of ETP, the bulk of the amount seems to be related to affiliate contributions. Specifically, RGP reimburses ETP for 30% of the capital expenditures related RGP's share of the Lone Star venture. The far larger portion of capital expenditures on Lone Star has been growth, rather than maintenance. I therefore regard the reimbursement as an offset to ETP's capital expenditures rather than an addition to cash flow from operations. Theoretically I should add back the portion related to Lone Star maintenance capital, but I don’t think that number is provided and, in any case, the amount would not be material.
Preliminary Look At Q1 Distributable Cash Flow Generated By Kinder Morgan Energy Partners [View article]
If what you mean is "Sustaining capital expenditures", you can find the annual number in the 2012 Form 10-K (p54). The numbers for 4Q12 and 1Q13 are provided in KMP's press releasees dated Jan 16 and April 17, 2013, respectively.
Preliminary Look At Q1 Distributable Cash Flow Generated By Kinder Morgan Energy Partners [View article]
1. Of course it is possible my analysis is too conservative in some cases. In the case of KMP, outflows from risk management activities totaled $157 million in 2012 reflecting termination of interest rate swap agreements. I ignored this outflow while management deducted it in calculating DCF. So for this item I was less conservative. On the other hand, I deducted $367 million of inflows in the "Other" category, while management included these in the DCF calculation. So here I was more conservative. The breakdown of items included in "Other" is provided in http://bit.ly/10eyvzb. Readers can decide for themselves which items are appropriate. As an aside, I could go either way on $171 million of that $367 million. It represents KMP’s share of depreciation in various joint ventures. The way I look at cash from joint ventures that appears in DCF numbers but not in an MLP’s cash flow statements our outlined in prior articles. For example, see the RGP analysis in http://bit.ly/ZmeWtk. 2. I always look at quarterly and TTM numbers but recognize that both are rear view mirror numbers. They are helpful but not sufficient in trying to assess future performance. Many other factors should also be taken into account. 3. The article on KMP referenced above takes a crack at answering your 3rd question. In the discussion of Table 6 I noted that KMR owns approximately 31% of KMP in the form of i-units that receive distributions in kind. Not having to pay cash for such a significant portion of distributions makes a big difference. I think it causes KMP’s coverage ratios to appear higher than what I believe they really are.
A Closer Look At Buckeye Partners' Distributable Cash Flow As Of 4Q 2012 [View article]
Based on my analysis, I became uncomfortable and, as detailed in prior reports, began reducing my position a while back. The balance left over is quite small. I redeployed the capital into EPD.
A Closer Look At Magellan Midstream Partners' Distributable Cash Flow As Of 4Q 2012 [View article]
You get taxed on your pro-rata portion of the MLP's income, not on the distributions. An MLP's income is typically less than its distributions, primarily because of depreciation deductions, so in effect the distributions are tax deferred. Distributions decrease your basis, so when you ultimately dispose of the investment your tax bill is higher (i.e., the tax deferred distributions are recaptured). If limited partners receive distributions equal to their share of net income, there is no tax deferral and consequently also no tax recapture in the future. DCF that is not distributed can be distributed in future years. But MLPs are typically required to distribute the bulk of the cas flow available for distributions.
Enterprise Products' Cash Flow Sustainability [View article]
(i) Net changes in fair value of derivatives
(ii) Amortization of net losses related to monetization of derivative instruments
(iii) Currency hedges and valuations
(iv) Unrealized gains on non-hedged interest rate derivatives
(v) Unrealized (gains) losses on commodity risk management activities
(vi) (Gains) losses on non-hedged interest rate derivatives
(vii) Proceeds from termination of interest rate derivatives
For example, gains or losses on non-hedged interest rate derivatives could reflect floating-to-fixed swaps used to hedge interest rates associated with anticipated note issuances. I would not consider this a sustainable item and have not yet developed a methodology for reliably differentiating between the various risk management items.Therefore I exclude the from my analysis at this point. An investor adopting a different approach can easily use my tables to incorporate risk management activies into the definition of sustainable DCF.
A Closer Look At Enterprise Products Partners' Distributable Cash Flow As Of Q1 2013 [View article]
A Closer Look At Plains All American Pipeline's Distributable Cash Flow As Of Q1 2013 [View article]
A Closer Look At Energy Transfer Partners' Distributable Cash Flow As Of Q1 2013 [View article]
Preliminary Look At Q1 Distributable Cash Flow Generated By Kinder Morgan Energy Partners [View article]
Preliminary Look At Q1 Distributable Cash Flow Generated By Kinder Morgan Energy Partners [View article]
2. I always look at quarterly and TTM numbers but recognize that both are rear view mirror numbers. They are helpful but not sufficient in trying to assess future performance. Many other factors should also be taken into account.
3. The article on KMP referenced above takes a crack at answering your 3rd question. In the discussion of Table 6 I noted that KMR owns approximately 31% of KMP in the form of i-units that receive distributions in kind. Not having to pay cash for such a significant portion of distributions makes a big difference. I think it causes KMP’s coverage ratios to appear higher than what I believe they really are.
A Closer Look At Regency Energy Partners' Distributable Cash Flow As Of Q4 2012 [View article]
A Closer Look At Buckeye Partners' Distributable Cash Flow As Of 4Q 2012 [View article]
A Closer Look At Magellan Midstream Partners' Distributable Cash Flow As Of 4Q 2012 [View article]
DCF that is not distributed can be distributed in future years. But MLPs are typically required to distribute the bulk of the cas flow available for distributions.
A Closer Look At Boardwalk Pipeline Partners' Distributable Cash Flow As Of 4Q 2012 [View article]
Issues Raised By Energy Transfer Partners' Acquisition Of 60% Of ETP Holdco [View article]
Issues Raised By Energy Transfer Partners' Acquisition Of 60% Of ETP Holdco [View article]
Issues Raised By Energy Transfer Partners' Acquisition Of 60% Of ETP Holdco [View article]
Issues Raised By Energy Transfer Partners' Acquisition Of 60% Of ETP Holdco [View article]
Issues Raised By Energy Transfer Partners' Acquisition Of 60% Of ETP Holdco [View article]