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Tim Plaehn  

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  • Rich Kinder: 'The Kinder Morgan Game Plan Is Still On Track'
    Yesterday, 7:44 PM KMI 13 Comments

    Summary

    • One fear was that Kinder Morgan would not be able to meet its growth plans in the new, lower commodity prices environment.
    • The announced first-quarter dividend was up 7% from the 2014 Q4 payout. The planned $2.00 per share will definitely be paid in 2015.
    • Richard Kinder emphatically stated that Kinder Morgan would be able to reach its rest-of-decade dividend growth goals.
  • Midcoast Energy Partners, Turnaround Play With A Current 9% Yield
    Yesterday, 1:46 PM MEP 2 Comments

    Summary

    • In 2014, Midcoast Energy Partners failed (Big Time!) to hit the growth goals provided with in the late 2013 IPO prospectus. MEP dropped by half from September to January.
    • For 2015 MEP reduced expenses plan by $50 million (80% of 2014 LP distributions) and dropped distribution growth guidance to 10% from previous 15%+.
    • The current 9% yield should drop if 10% growth goal is met. MEP unit price poised to gain 50% by end of 2015.
  • Ventas Gets Off The Government Dole To Re-Energize Its Dividend Growth Prospects
    Tue, Apr. 14 VTR 8 Comments

    Summary

    • Ventas announced it will spin-off its skilled nursing facility -SNF- assets into a new REIT with separate management.
    • SNF facilities generate the majority of revenues from government programs, putting operator revenues at risk of funding cuts.
    • I like the prospects of the post spin-off VTR for a 4% yield with 10% dividend growth.
  • Fast Math: Will Northern Tier Energy Declare A 6% Distribution For Q1, Producing A 25% Price Gain?
    Wed, Apr. 8 NTI 26 Comments

    Summary

    • Refining margins should be much better in Q1 compared to Q4, letting variable rate refining MLPs like NTI declare higher distributions.
    • Northern Tier sources the majority of its crude from North Dakota, which priced a deep, $14 per barrel discount to WTI in Q1.
    • My math shows NTI has the potential to declare a $2.00 per unit distribution for the quarter. A conservative $1.50 is 6% of the current unit price.
  • Plains All American Pipeline Could Be The Best Performing Large-Cap MLP Over The Next 2-3 Years
    Tue, Apr. 7 PAA 36 Comments

    Summary

    • PAA management has lowered 2015 distribution growth guidance to 7% compared to 10% growth over the last few years.
    • The company expects $50 oil to be around for the next 1 to 2 years. Plains continues to add growth projects that will pay off handsomely when energy prices recover.
    • PAA currently yields 5.5% above its historical average and provides an attractive total return profile even with temporary lower distribution growth.
    • For growth focused investors, Plains GP Holdings is poised to generate 25% total returns in the current environment and higher if crude moves higher.
  • Breitburn Energy Gets A White Knight, But Again Slashes Distribution Rate
    Mon, Mar. 30 BBEP 45 Comments

    Summary

    • Breitburn Energy Partners needed to do something about the high balance on its revolving credit facility or face the need to completely suspend common unit distributions.
    • The deal with EIG Global Energy Partners injects equity and gives Breitburn some breathing room. The distribution was again slashed in half.
    • Based on the new distribution rate, BBEP could fall another 20% or more before stabilizing. The units are a short term sell, but there is longer term potential.
  • Linn Energy Inks Another Co-Development Deal - Will The Strategy Pay Off?
    Tue, Mar. 24 LINE 48 Comments

    Summary

    • Linn Energy just announced a joint venture agreement that will bring $1 billion in outside capital for oil and gas asset acquisitions and development.
    • The new venture, called "AcqCo", and a previous "DrillCo" will allow Linn to grow production without tapping the debt and equity markets for capital.
    • However, it may take years before these ventures generate enough extra cash flow to allow Linn to increase distributions to investors.
  • Refinery MLP Data: Good Odds For Higher Q1 Distribution Announcements Next Month
    Mon, Mar. 23 ALDW, CVRR, NTI 7 Comments

    Summary

    • The three refinery MLPs pay out 100% of distributable cash each quarter, with significant swings in distribution amounts from quarter to quarter.
    • Energy price crack spreads are up in Q1 compared to all four quarters of 2014.
    • The downstream MLPs will declare Q1 distributions in late April or early May. All have the potential to pay $1.00 per unit or more, equated to mid to high-teens yields.
  • Small Cap Arc Logistics Partners Combines 8%+ Yield With Deep Pocketed Sponsors
    Mon, Mar. 23 ARCX 6 Comments

    Summary

    • Arc Logistics Partners is a very small cap MLP with deep pocketed investors and sponsor.
    • History since IPO shows that distribution growth may be less than steady, but the sponsor is committed to growing the business.
    • ARCX currently yields 8.5% with a 7% distribution increase scheduled for Q3.
  • I Missed, But Really Didn't Miss, On My Northern Tier Energy Variable Distribution Forecast
    Fri, Mar. 6 NTI 21 Comments

    Summary

    • The NTI Q4 distribution of $0.49 was half of what I forecast at the end of 2014.
    • An increase to working capital cash reserves reduced distributable cash flow and the distribution. NTI still had a very profitable Q4.
    • In the current energy price environment, NTI could pay up to $4.00 in distributions over 2015, a 16% yield based on the current unit price.
  • Legacy Reserves Rolls The Dice, Betting On Higher Energy Prices Sooner Rather Than Later
    Fri, Mar. 6 LGCY 5 Comments

    Summary

    • Legacy Reserves has not yet cut its distribution, but that even will occur if certain conditions are not met.
    • The goal of Legacy's management is to grow cash flow out of the low energy price environment through acquisitions.
    • At this point, even a distribution cut would help the unit price, considering the current 21% yield.
  • Memorial Production Partners Shows How Upstream MLPs Should Operate
    Thu, Mar. 5 MEMP 24 Comments

    Summary

    • 12 out of 15 upstream MLPs have slashed distribution rates. Memorial Production Partners has not reduced its distribution and has no plans to do so.
    • To thrive in the current low energy price market, MEMP has put all its tools to work including a best in class hedging strategy and a supportive sponsor.
    • MEMP should trade at a premium to its peers, which means 20% to 25% unit price upside from here along with a 10% yield.
  • ONEOK Bails Out On Planned Dividend Growth For 2015
    Tue, Feb. 24 OKE 29 Comments

    Summary

    • Due to falling NGL prices and slower-than-expected gathering growth, ONEOK has significantly reduced its spending and distribution growth forecasts for 2015.
    • The MLP, ONEOK Partners, sports a 7.5% yield and remains at least a hold for income investors.
    • ONEOK, Inc., the general partner, will no longer produce GP-like dividend growth. Any further declines in energy prices might even lead to a dividend cut.
  • High-Yield New Residential Investment Boosts Shareholder Value (A Lot) With Acquisition
    Tue, Feb. 24 NRZ 20 Comments

    Summary

    • New Residential Investment (NRZ) will acquire Home Loan Servicing Solutions (HLSS), the only other company focused on mortgage servicing rights investments.
    • NRZ improves its position as a unique, growing, high-yield financial REIT.
    • Check the math below to see how I believe NRZ will produce a 30% total return over the next 12 months.
  • Linn Energy: 2014 Asset Restructuring To Pay 'Dividends' In 2015 And Beyond
    Thu, Feb. 19 LINE 73 Comments

    Summary

    • I tuned into to Linn Energy's 2014 Q4 earnings conference call to get a feel on how the company plans to adjust its business for much lower energy prices.
    • Linn reduced capex spending to fund it 100% out of internal cash flow. No more tapping the debt market to pay for needed capital spending.
    • Linn has shifted to a much more conservative approach. The 10% distribution is safe, but it will take several quarters or more to see if distribution growth can resume.
  • Vanguard Natural Resources Bites The Bullet, Slashes Distributions, And Sets Up For Future Growth
    Wed, Feb. 18 VNR 17 Comments

    Summary

    • Vanguard Natural Resources follows Linn Energy and Breitburn Energy Partners, reducing its monthly distribution rate by 44%.
    • 2015 cash flow guidance shows strong distribution coverage at the current NYMEX futures prices for oil and natural gas.
    • VNR had dropped $1.00 on the news to $17, but needs to get below $15 to be a buy compared to LINE and BBEP.
  • Digging Into The New InfraCap MLP ETF: Notes On My Conversation With Fund Management
    Thu, Feb. 12 AMZA 15 Comments

    Summary

    • I was invited to interview the portfolio management of the newest, actively managed, MLP-focused ETF, trading under the symbol AMZA.
    • My concern with the new fund was the level of visibility provided about fund holdings, compared to a traditional ETF, which must match a specified index.
    • AMZA provides a new, enhanced packaged fund product for investors who want MLP exposure. The active management strategies should provide meaningful and measurable improvements on traditional MLP ETFs.
  • The Best Bet In The Phillips 66 Vs. Valero MLP Distributions Growth War
    Wed, Feb. 4 PSX, PSXP, VLO 6 Comments

    Summary

    • Phillips 66 Partners and Valero Energy Partners have followed parallel and aggressive distribution growth profiles.
    • Expected 25%+ distribution growth in 2015 should lead to similar total returns from PSXP and VLP.
    • VLP has lagged PSXP throughout its short life. Expect a reversal of total return out-performance in 2015.
  • Positive Leading Indicators For The High-Yield Refinery MLPs
    Sat, Jan. 31 ALDW, CVRR, NTI 24 Comments

    Summary

    • The January 29 earnings releases of Valero Energy and Phillips 66 provide the first view on how crude oil refiners fared in the fourth quarter.
    • VLO and PSX earnings were well above Wall Street estimates and similar to Q3 profits before the crude oil fall.
    • Refining MLPs, ALDW, CVRR and NTI could jump by 25% or more if Q4 distributions are in line with the Q3 payouts.
  • Has Eagle Rock Energy Partners Become The Best Upstream MLP Value Play?
    Wed, Jan. 28 EROC 25 Comments

    Summary

    • EROC declared its Q4 distribution of $0.07 per unit, the same as Q3.
    • 5% of units have been repurchases and EROC is marketable securities rich with its RGP holdings.
    • If Q4 results are as expected and management announces some growth initiatives, the unit price could jump by 25% or more on the earnings release.
  • 2 Upstream MLPs Hold Steady On Distribution Rates - For Now
    Fri, Jan. 23 BBEP, LGCY, LINE 15 Comments

    Summary

    • Vanguard Natural Resources and Legacy Reserves bucked the trend announced distributions equal to the previously paid rates.
    • Mid-Con Energy Partners went very conservative, slashing distributions by 75% with a forecast of very strong cash flow coverage.
    • Upstream MLP investors are being well-paid to wait and see what happens to energy prices and production expenses.
  • InfraCap MLP ETF: Can An Actively Managed ETF Add Value To The Alerian MLP Index?
    Fri, Jan. 23 AMZA 12 Comments

    Summary

    • The InfraCap MLP ETF is one of the new, actively managed ETFs, bringing return-enhancement strategies to the ETF space.
    • MLP-focused funds face additional tax hurdles not faced by ETFs in other market sectors. The InfraCap fund strategies may help overcome those hurdles.
    • The investment results from the new MLP can be directly compared to the largest MLP ETF, allowing investors to see if the active management strategies work.
  • A Hedged ETF Strategy For Rising Interest Rates
    Tue, Jan. 20 SCHZ, TBT, TBX 2 Comments

    Summary

    • The 10-year Treasury Yield at 1.8% is 1.2% below where it started 2014. Forecasts that rates would rise in 2014 were very, very wrong.
    • With the 10-year yield now at a record low level, the probability of rising rates from here are better.
    • Outlined below is a hedged strategy using short and long bond ETFs to profit from rising long term interest rates.
  • Can Legacy Reserves Avoid The Upstream MLP Distribution Cut Trend?
    Thu, Jan. 15 LGCY 57 Comments

    Summary

    • The first two upstream MLPs, LINE and BBEP, to announce 2015 distributions have reduced their payouts by over 50%.
    • The Legacy Reserves management team likes to show how their MLP sustained its distribution in 2008 and 2009, the last time the price of crude oil crashed.
    • Legacy Reserves has the financial liquidity to grow out of the current low price environment through acquisitions, just like in 2008 through 2010.
    • Investors (and MLP management teams) need to decide if oil price history will repeat or if this times is different.
  • Small-Cap Logistics Focused MLPs Provide High-Yield Value Plays
    Thu, Jan. 15 ARCX, DK, DKL 7 Comments

    Summary

    • MLPs providing refinery centric logistics -- terminals, storage, pipelines -- services should not be affected by low crude oil prices.
    • Yet the unit prices of all MLPs have been driven down in the current energy sector sell-off.
    • The newer small-cap refinery logistics MLPs sport much higher yields than their large cap peers with similar growth potential.
  • Look For Share Price Gains When MLP GP Companies Announce Q4 Dividends
    Fri, Jan. 9 ACMP, ENLC, ENLK 14 Comments

    Summary

    • On Jan 8, Plains GP Holdings announced a 6.4% distribution increase which pushed the share price up 4.5% over the next two days.
    • Share prices of the other MLP general partner companies have continued to decline on low crude oil price news.
    • Dividend announcements with significant rate increases over the next two weeks should reverse the falling share prices and start an MLP GP rally.
  • Linn Energy Explains Outlook After Distribution And Capex Spending Reductions
    Editors' Pick • Tue, Jan. 6 LINE, LNCO 82 Comments

    Summary

    • Linn Energy's management held a conference call to explain its 2015 budget plan changes, including the 57% distribution cut.
    • The new budget provides 1.18X dcf coverage with $60 oil and $3.50 natural gas. Gas production is 100% hedged and oil 70%.
    • The current 11% yield provides an attractive return base, if crude prices start to rise and Linn can grow the distributions to unit holders.
  • 2 For 2 On Upstream MLP Distribution Cuts, Linn Energy And Breitburn Energy Partners Reposition For Growth
    Sun, Jan. 4 BBEP, LINE, LNCO 27 Comments

    Summary

    • On Friday Jan 2, Linn Energy announced a 57% distribution cut before the market opened. Breitburn announced a similar reduction after the market closed.
    • Investors got excited and the LINE, LNCO and BBEP unit prices gained about 10%.
    • Lower distributions rates will let these upstream MLPs grow those distributions if crude and natural gas prices rise from the current levels.
  • Data Metrics For Variable Pay Refinery MLPs: Final Q4 Numbers
    Sat, Jan. 3 ALDW, CVRR, NTI 13 Comments

    Summary

    • With the large drop in crude in Q4, the NYMEX based crack spread stayed very stable throughout the quarter.
    • The contraction in the WTS-WTI discount may hurt results for the ALDW and CVRR refineries.
    • NTI will continue to benefit from low cost Bakken crude.
    • All three refinery MLPs are undervalued based on my Q4 distribution estimates and should increase in value when Q4 results are announced.
  • January Will Be Big With Upstream MLP Distribution Announcements
    Dec. 31, 2014 BBEP, EROC, EVEP 45 Comments

    Summary

    • Historically MLPs announce Q4 distributions in January, weeks before earnings are reported.
    • Eight upstream MLPs should announce distributions in January, providing investors with a small glimpse into the future.
    • I expect distribution rates to remain level, providing some unit price support.
  • Ship Finance Gets Its Christmas Present
    Dec. 31, 2014 SFL 16 Comments

    Summary

    • Seadrill has exercised the purchase option on one of three deep water drill rigs leased from Ship Finance.
    • SFL will realize $108 million in net cash from the $456 million purchase price.
    • This announcement shows how SFL structures contracts to always protect cash flow and its high-yield dividend.
  • How Low Crude Prices Could Quickly Lead To Higher Crude Oil Prices
    Dec. 30, 2014 BBEP, LGCY, MEMP 34 Comments

    Summary

    • They say the best cure for low oil prices is low oil prices. By this, low crude prices will lead to a reduction in drilling and production growth.
    • Data provided below shows how a relatively small reduction in drilling activity can halt oil production growth in the U.S.
    • It will be several quarters before the impact of lower crude prices on upstream MLP results. By then oil could very well be back on the way up in price.