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Tim Plaehn

 
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  • Has Eagle Rock Energy Partners Become The Best Upstream MLP Value Play?
    Wed, Jan. 28 EROC 18 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 81 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.
  • Data Metrics For Refinery MLPs: 2014 Q4 Matches Pace Of Q3. Value Abounds!
    Dec. 18, 2014 CVRR, ALDW, NTI 26 Comments

    Summary

    • The refinery MLPs have fallen 30% along with the overall energy sector. CVRR set a new 52-week low on December 16.
    • Crack spreads so far in Q4 are very similar to Q3. Profitability and distributions for these MLPs in Q4 should be very similar to last quarter.
    • ALDW, CVRR and NTI are positioned for 20% to 30% unit price gains when Q4 distributions are announced early in 2015.
  • Looking For Alpha Among The Large Cap MLPs - Part 2
    Dec. 11, 2014 ACMP, OKS, RGP 15 Comments

    Summary

    • Three large-cap midstream MLPs currently yield around 8%. These yields are well above the average from the stable group of larger MLPs.
    • OKS and RGP have been accelerating their distribution growth rates, to levels comparable with their lower yield peers.
    • Investing for an 8% yield with 7% to 8% growth provides an attractive safety net in the current volatile energy sector.
  • Blackstone Mortgage Trust: 7% Yield And Rising Rates Protection
    Dec. 10, 2014 BXMT 5 Comments

    Summary

    • BXMT differs from most mortgage REITs with a business of originating and owning a portfolio of commercial property mortgages.
    • Parent Blackstone Group gives BXMT a competitive advantage when competing for commercial mortgage opportunities.
    • A 100% floating rate loan portfolio will let the profits and the dividend increase as interest rates move higher.
  • Crude Price Drilling Economics From The ONEOK Investors Conference
    Dec. 5, 2014 OKS 19 Comments

    Summary

    • The midstream MLP ONEOK investors conference provided a granular look at drilling and crude economics in four major energy basins.
    • Energy producers are more efficient than you may expect, with operations remaining profitable down to as low as $45 per barrel WTI.
    • The ONEOK tandem, OKS and OKE, offer similar total return potential - 15%+ annually - as they support crude producers with natural gas and NGL services.
  • Looking For Alpha Out Of The Large Cap MLPs - Part 1
    Dec. 5, 2014 AMJ, BPL, EEP 13 Comments

    Summary

    • Current yield vs distribution growth provide an investment total return picture for MLPs.
    • The large cap MLPs should provide a higher level of safety, yet there is quite a spread of yields and growth rates among the 13 largest public partnerships.
    • Part 1 of 3 covers the middle-of-the-pack large MLPs based on yield and growth.
  • BreitBurn Energy Partners' Crude-Focused Production Will Produce A Derivatives Value Windfall In Q4
    Dec. 3, 2014 BBEP 8 Comments

    Summary

    • The BBEP unit price is down 50% in the last 3 months, pushing the yield up to almost 18%.
    • The BBEP hedging derivatives are heavily skewed to crude oil, which should produce a huge mark-to-market derivatives gain in Q4.
    • The hedging practices of upstream MLPs like BBEP may produce larger-than-expected gains, solidifying the current distributions.
  • Hedging Windfall Potential For Vanguard Natural Resources
    Dec. 2, 2014 VNR 88 Comments

    Summary

    • VNR has declined by 37% since a July peak and 21% in the last 5 days due to the energy sector sell off triggered by the drop in crude.
    • VNR's energy price hedges should provide a windfall profit in Q4, boosting the unit price and giving hope to investors. VNR now yields over 12%.
    • Realizing derivatives profits this quarter may allow VNR to grow its business and distributions as oil recovers in 2015.
  • Will Linn Energy Post A Windfall Profit For Q4?
    Dec. 1, 2014 LINE, LNCO 58 Comments

    Summary

    • LINE and LNCO dropped by 16% and 18% on Black Friday, pushing yields well above 15%.
    • The market seems to give no credit for the derivative hedging activities of the upstream MLPs.
    • Looking at the Linn Energy derivatives gains and losses trends indicates the company could post a monster derivatives gain for Q4, enough to cover distributions for all of 2015.
  • Update: Ferrellgas Partners' Distribution Rate
    Nov. 26, 2014 FGP 6 Comments

    Summary

    • In September, I predicted a possible distribution rate increase for FGP in the fourth quarter. It did not happen.
    • FGP investors have earned the same $0.50 per unit per quarter for 20 straight years.
    • I will wait for definitive word from FGP management on a distribution increase - if it happens - before putting any further interest into this MLP.
  • CyrusOne Is A Technology Growth Stock Masquerading As A REIT
    Nov. 19, 2014 CONE Comment!

    Summary

    • Data center REIT CyrusOne markets its services to enterprise-level customers rather than the usual Internet focus of other data center REITs.
    • Two year history of 20% year-over-year revenue growth and 30% plus FFO growth.
    • The CONE dividend should increase by 35% to 40% in March 2015, leading to a 30% or better 12-month total return.
  • Data Metrics For The Refinery MLPs: Post Earnings Valuations
    Editors' Pick • Nov. 15, 2014 ALDW, CVRR, NTI 12 Comments

    Summary

    • For the third quarter, ALDW and NTI paid significantly higher distributions on improved margin results. The CVRR payout dropped by half due to a refinery fire.
    • Crack spreads remain attractive so far in Q4, in spite of the big drop in the price of crude oil.
    • Refinery MLP sector dynamics are changing as ALDW adds a second refinery.
  • Spectra Energy Partners: A Conservative Yield Plus Income Growth Story
    Nov. 14, 2014 SEP 9 Comments

    Summary

    • Spectra Energy Partners has posted one of the best 12-month returns of the large-cap MLPs, up 34%.
    • An almost 100% fee-based business model shelters the Spectra revenues stream from volatile energy prices.
    • Investors who want an attractive yield plus near-10% growth from a very safe MLP business model should take a closer look at SEP.
  • Alon USA Partners Doubles Capacity To Support 15% Yield With Refinery Purchase
    Nov. 14, 2014 ALDW, ALJ 5 Comments

    Summary

    • Alon USA Partners will purchase the 74,000 bpd Krotz Springs refinery from Alon USA Energy.
    • Krotz Springs competes in the Gulf Coast Energy market, which has been less profitable than Alon's Big Springs refinery.
    • The acquisition should provide cash flow stability, but I do not expect it to increase distributions, which I already forecast at 15% of the current unit price.
  • Update: Calumet Specialty Products Earnings
    Nov. 11, 2014 CLMT 30 Comments

    Summary

    • CLMT report 1.4 times distribution coverage, reversing 6 quarters of failing to cover the distribution.
    • I reverse my prediction that Calumet will reduce its distribution payment.
    • Since 2012, the company has added interest expense and distribution payment amounts in excess of the current full EBITDA run rate gain since 2012.
  • CVR Refining In Danger Of Under Performance Again In Q4
    Nov. 11, 2014 CVRR 16 Comments

    Summary

    • A July refinery fire and facility shutdown resulted in lower throughput and a 40% distribution reduction for the CVRR Q3 distribution.
    • The CVRR operating margin per barrel has been below energy price crack spreads and the results of its peers for the last two quarters.
    • Disruptive energy prices in the fourth quarter will negatively affect CVRR results to a greater degree than for the other refining MLPs.
  • Update: Crestwood Midstream Partners Earnings And Distribution Growth
    Nov. 7, 2014 CMLP 6 Comments

    Summary

    • CMLP has increased its distribution for 3 quarters to allow DCF/unit to catch up with the payout rate.
    • DCF coverage has gone from 0.52 to 1.05 times in the last year.
    • There is a high probability that distribution growth will resume for Q4, resulting in a large unit price gain.
  • Improved Efficiencies Produce Big 'Turnaround' For Alon USA Partners
    Nov. 4, 2014 ALDW 5 Comments

    Summary

    • Alon USA Partners declared a $1.02 quarterly distribution, greater than the last three payouts combined.
    • Q3 saw a positive combination of refinery operating improvements and attractive crude spreads for ALDW.
    • With the more efficient refinery operations, ALDW is poised to pay 15% in distributions over the next four quarters.
  • Update: Eagle Rock Energy Partners Restarts Distribution Payments
    Oct. 29, 2014 EROC 22 Comments

    Summary

    • EROC declares a $0.07 quarterly distribution after two quarters without a payment to investors.
    • Earlier this year, EROC sold its midstream business, to focus on upstream operations.
    • The new distribution rate gives an 8.2% yield with potential for distribution growth in the upcoming quarters.
  • Fast-Growth Phillips 66 Partners Is 20% Overvalued Compared To Its Peers
    Oct. 24, 2014 PSXP 2 Comments

    Summary

    • PSXP carries the lowest yield of the fast-growth midstream MLPs.
    • Recent distribution and dropdown announcements point to lower-than-forecast distribution growth.
    • To carry a yield comparable to its peers, PSXP should be priced 15% to 23% lower than the current unit value.