Calumet Specialty Products Partners LP And Anchor Drilling Fluids, The Acquisition That Will Drag Earnings Lower
- Vertically integrated producer and distributor of specialty and fuel products with more recent exposure to oil field drilling services and products.
- Acquisitions of Anchor Drilling Fluids and Specialty Oilfield Solutions came at an inopportune time and will be a drag on 2015 earnings.
- High risk of distribution cut due to unstable cash flows and declining distribution coverage ratio.
- Refinery expansion projects in North Dakota and possibly Montana will not contribute as much to EBITDA as recently expected.
- 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.
Why I Am Still Long Calumet, Despite The Recent Drop
- CLMT is reducing expenditures and increasing efficiency.
- New acquisitions coming online will increase EBITDA.
- Both RIN pricing and crack spread have improved.
Distribution Reduction In The Cards For Calumet Specialty Products?
- After a great 2012, in 2013 CLMT increased distributions to investors by 52%.
- In 2013, distributable cash flow dropped by 94% and only covered 10% of distribution paid on LP units.
- EBITDA and DCF have not recovered in 2014, and growth projects will not make up the difference. Finances will force a distribution reduction.
A 9% Income Refinery Play With EBITDA Momentum As An Alternative To E&P MLPs
- Calumet Specialty Products Partners is a growing refiner and processor of specialty carbon products.
- Calumet Specialty Products Partners is a valid alternative to other high-yield income investments in the MLP sector.
- With a near 9% distribution yield and strong adjusted EBITDA growth prospects, this refiner is a Strong Buy.
Calumet: High-Yielding Refiner Continues To Deliver
- High yielding refiner Calumet Specialty Product Partners continues to deliver stellar results and recently blew through quarterly earnings expectations.
- The latest earnings beat has resulted in analyst upgrades and a nice rise in the stock of this limited partnership.
- The refiner also has other catalysts that should substantially boost earnings and distributable cash flow in the years ahead.
Calumet Specialty Product Partners: Do The 2 Recent Acquisitions Threaten The Distribution?
- Calumet Specialty Products Partners has an exceptional management team that specializes in acquiring competitors in a highly fragmented industry.
- Margin compression, RIN costs and refinery turnarounds have combined to temporarily decimate DCF and the distribution coverage ratio.
- $500-$550 million in cap-ex investment over 3 years will result in record high EBITDA, DCF and distribution growth.
Will Calumet Specialty Products Be Forced Into A Dividend Cut?
Calumet: Brighter Opportunities With Cost-Advantaged Crude
Fri, Jan. 23, 5:11 PM
Thu, Jan. 8, 2:56 PM
- Williams Cos. (WMB +1.1%) is upgraded to Sector Outperform from Sector Perform at Howard Weil, which also raised its price target by $13 to $68, as it feels the stock has been unfairly punished in its ~8.5% drop YTD.
- The firm says WMB's yield is well above the peer group and its business is less exposed to the decline in commodity prices than the stock's performance would indicate; it echoes the same comments about Calumet Specialty Products (CLMT +1.5%) but maintains its Outperform rating.
Dec. 23, 2014, 3:11 PM
- Calumet Specialty Products Partners (CLMT +5.7%) is resumed with a Buy rating and $30.50 price target at MLV, which sees units poised for a 2015 rebound as maintenance capex declines and leverage should continue to moderate from a peak of 7x debt/EBITDA toward 4x.
- MLV also sees potential for a modest distribution increase in H2 2015 as LTM coverage should exceed 1x, and projects the specialty products segment - which accounts for ~75% of profit - will benefit from lower crude costs.
Nov. 5, 2014, 7:14 AM
Sep. 10, 2014, 3:28 PM
- Energy stocks, especially refiners, are taking a beating following the latest EIA inventory report that said gasoline stockpiles rose by 2.4M barrels last week, helping send U.S. crude oil futures to 16-month lows (-1.2% to $91.61/bbl) and Brent crude to 17-month lows (-1.1% to $98.02).
- The report is bearish given the large increases in refined product inventories; "even though the crude drawdown was close to expectations, it seemed to disappoint," Again Capital's John Kilduff says.
- The EIA report followed the agency’s updated demand growth report issued yesterday and this morning’s release of OPEC’s report on the oil market; both see lower demand growth this year and next.
- Oil majors are mostly lower: XOM -0.6%, CVX -1.4%, COP -0.3%, but BP (+2.9%) and RDS.A (+1%) are higher.
- Refiners are hit hard: VLO -3.6%, PSX -1.5%, MPC -1.9%, HFC -2.5%, TSO -2.9%, WNR -4.1%, CVI -1.6%, ALJ -1.8%, PBF -3.5%, DK -1.8%, CLMT -1.8%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, ERY, XOP, DIG, BNO, UGA, DTO, DBO, DUG, IYE, IEO, CRUD, PXE, USL, PXI, PXJ, DBE, FENY, UWTI, DWTI, DNO, RJN, RYE, FXN, SZO, OLO, JJE, DDG, ONG, RGRE, OLEM, TWTI, UBN
Aug. 6, 2014, 3:59 PM
- Calumet Specialty Products Partners (CLMT -3.1%) is sharply lower after reporting a large Q2 earnings miss due to longer than expected Shreveport downtime and weak fuel segment margins.
- Q2 adjusted EBITDA was $39.3M vs. $70M in the year-earlier quarter.
- Reported negative distributable cash flow of -$20.4M vs. -$2.5M in the prior-year period, with the Y/Y decrease driven primarily by the EBITDA decline and higher cash interest expense, partially offset by lower turnaround costs.
- In its earnings conference call, CLMT said pricing and demand remain strong, no major maintenance is planned at any facilities for the remainder of the year, and expects FY 2014 capex of $365M-$410M.
Aug. 6, 2014, 7:35 AM
Jun. 27, 2014, 3:59 PM
- Refiners are lower again today after a slight bounce yesterday, as investors resume wariness over the U.S. government's move to allow exports of ultra-light crude oil.
- But Credit Suisse analysts say there’s more to the drop in refiners: U.S. refining is still linked to the world, there is overcapacity in global refining and the risk premium in the oil price is rising, and this week the market was reminded that the lightest barrels (condensate) in U.S. production can be exported (via distillation towers) at relatively low cost, creating more runway for black oil.
- The firm downgrades Holly Frontier (HFC -2.5%), and says Tesoro (TSO -0.7%) needs to beat convincingly in 2Q earnings... to drive further relative upside”; however, Marathon Petroleum (MPC -1.7%) "is becoming significantly more interesting after underperforming,” while it sees most potential in niche refiners such as Delek US (DK -3.4%) and Western Refining (WNR -0.9%).
- Also: VLO -1.1%, ALJ -2.5%, PSX -0.7%, PBF -3.5%, CVI +0.4%, CLMT +1.5%.
Jun. 26, 2014, 3:33 PM
- Most refiners recover part of yesterday's big drop, which some say was an overreaction to the U.S. government move to allow two oil companies to export ultra-light crude oil for the first time: TSO +2.8%, VLO +2%, PSX +1%, CVI +0.7%, CLMT +0.7%, WNR +0.6%, MPC +0.2%, ALJ -1%, PBF -0.6%, HFC -0.3%.
- The death of U.S. refiners is "greatly exaggerated," Cowen analysts say: "The spirit of the law - that hydrocarbon liquids produced in the U.S. must be processed in the U.S. - remains in place, and permits for condensate exports do not constitute precedent for crude oil... We continue to see potential for a meaningful feedstock advantage for U.S. refiners emerging later in 2014."
- Ned Davis Research, however, thinks the news is "potentially game changing for refiners," since it signals a change in the government’s position on oil exports more broadly and noting that it is the export ban, plus inadequate pipeline infrastructure, that has fed recent refiner outperformance.
Jun. 9, 2014, 6:48 PM
- Calumet Specialty Products Partners (CLMT) says it will invest as a joint venture partner in the construction of a Lake Charles, La., commercial gas-to-liquids plant that is expected to produce 1,100 bbl/day of refined products from natural gas.
- CLMT intends to invest $25M in exchange for an equity interest of ~22% in the joint venture; the total cost of the plant is estimated at $135M and should be operational by late 2015.
May. 15, 2014, 4:59 PM
- Oil refiners will be required to further curb air pollution from storage tanks, flares and heavy-oil processing equipment under proposed rules released today by the EPA.
- The proposed rules also would require refiners for the first time to measure concentrations of cancer-causing benzene at their fence lines and provide the data to the public.
- Top refiners include VLO, TSO, PSX, ALJ, MPC, WNR, HFC, CVI, DK and CLMT.
May. 8, 2014, 12:27 PM
- Calumet Specialty Products (CLMT +4.3%) powers higher as units are upgraded to Outperform from Neutral at Credit Suisse, a day after reporting Q1 earnings of $0.50/unit and revenues of $1.34B, both ahead of analyst expectations.
- CLMT's Q1 distribution coverage ratio was 0.94x, supported by an improving specialty product segment and acquisition contribution; sees total 2014 capex of $340M-$385M, with $270M-$300M allocated toward organic growth projects.
- In its upgrade, Credit Suisse notes CLMT is in the process of completing several large projects with the potential to double EBITDA by 2016, and CLMT is eyeing at least half a dozen potential acquisitions under evaluation.
Apr. 28, 2014, 12:45 PM
- Prices of U.S. crude grades such as West Texas Intermediate are starting to disconnect from Brent benchmark prices again, rebounding to ~$9/bbl two weeks after hitting a low for the year of less than $3.70.
- Stocks at the Cushing, Okla., hub have dropped by 16M barrels since late January but have jumped by 43M on the Gulf coast; overall, U.S. commercial crude oil inventories now stand at their highest level on record, according to Barclays.
- With the oil stuck there with nowhere to go, Gulf coast refiners can name their price - great for the likes of Valero Energy (VLO +1.9%), because they can then refine that oil into products such as gasoline that are allowable for export.
- Also today: PSX +0.9%, MPC +1.8%, HFC +0.7%, TSO +1.3%, CVI +0.9%, WNR +0.2%, PBF +1.1%, CLMT +2.3%, ALJ -1.2%.
- ETFs: USO, OIL, UCO, SCO, DTO, DBO, BNO, CRUD, USL, UWTI, DNO, DWTI, SZO, OLO, OLEM, TWTI
Mar. 26, 2014, 8:16 AM
- Calumet Specialty Products Partners (CLMT) agrees to acquire ADF Holdings, the parent company of Anchor Drilling Fluids, for ~$235M.
- CLMT says the acquisition positions it as one of the leading suppliers of drilling fluids to the domestic E&P industry, and will increase sales in a business that generates consistent cash flow with limited ongoing capital investment.
- To fund the deal, CLMT will offer $850M in senior notes due 2021.
Mar. 24, 2014, 5:52 PM
- MDU Resources (MDU) says it is looking for more natural gas producers to sign up to use its planned $650M Dakota pipeline that would transport the fuel through North Dakota to Minnesota.
- MDU in January launched a 120-day period for prospective customers of the pipeline, the largest project in the company's history, to sign supply agreements to transport natural gas.
- The open season period ends May 30, and MDU then will begin deciding whether to build the pipeline; permitting alone could take two years, and construction should then take six to 12 months, CEO Dave Goodin says.
- Also, Goodin says MDU, along with Calumet Specialty Products Partners (CLMT), is focused on finishing the new Bakken refinery but has no current plans to build a second one.
Mar. 5, 2014, 6:21 PM
- Energy Secretary Ernest Moniz said at the CERAWeek conference this week that the oil industry has failed to make a convincing case for why the U.S. government should allow the export of domestic oil when the U.S. still imports 5M bbl/day.
- The statement should please America's refiners, who have enjoyed increased profits from buying U.S. oil on the cheap to produce products such as gasoline.
- At the same time, Moniz went further than before in suggesting the Obama administration could redo the economic analysis that underpins its decisions on exporting American natural gas.
- Moniz also dismissed speculation that the Obama administration has in mind a hard cap on possible natural gas exports.
- Refiners: PSX, MPC, HFC, VLO, TSO, WNR, NTI, DK, CLMT, ALJ, CVI.
CLMT vs. ETF Alternatives
Calumet Specialty Products Partners LP is a producer of hydrocarbon products in North America. It operates in two segments: specialty products and fuel products; and owns plants located in Louisiana, Wisconsin, Montana, Texas, Pennsylvania and New Jersey.
Other News & PR