elliot_mllr

On EPS and MLPs

See my comment to Mr. Gue's reply to you.


On Nov 01 02:07 PM Karl Glazier wrote:

> By adding back depreciation, aren't you assuming the assets will
> never have to be replaced?
> If the assets are depreciated over a shorter period than their expected
> life, an adjustment should be made accordingly.
> But adding back all depreciation is not reflecting reality.
> If I am counting only the maintenance expenses on my car, I am fooling
> myself.

On EPS and MLPs

Moreover, depreciation is a P & L charge, as are depletion allowances, but when a new capital asset is needed (pipeline, refinery, etc.) that is a balance sheet item and does not impact the P & L or DCF. That capital asset is paid for by debt, new equity or a combination of those.


On Nov 01 02:52 PM Elliott Gue wrote:

> Thanks for the comment. There are refineries in the US that have
> been in operation for a century, long beyond what would be considered
> the useful life of such an asset. However, over the years, every
> piece of this equipment has been replaced and upgraded, likely several
> times.
>
> To use your example, the effect would be the same as you replacing
> every part of your car gradually over time including the body itself.
>
>
> Maintenance expenses from an MLP are designed to reflect normal replacement
> and upgrading of equipment surrounding the asset over time. It's
> likely that these pipelines will not be replaced if, by replacement,
> you mean totally dismantled, scrapped and rebuilt.
>
> Adding back depreciation and then factoring in a maintenance expense
> that reflects the need for ongoing replacement and upgrading is the
> most relevant measure of an MLP's earnings power in my view. Of course,
> as I noted in the article, one has to account for the reasonableness
> of the maintenance expenses the particular MLP uses to calculate
> DCF.

MLPs: GP / LP Relationship Is Key

I believe that the reason yields on GPs are lower than on the underlying LPs is because the GPs trade at a higher price (or lower yield) since their greater dollar return growth is higher and this makes them more attractive.

Opportunity in the Brazilian Real and Chinese Renminbi

What about the tie between the Chines RMB and the USD? There is a very small difference between them introduced several years ago at the insistence of the US govt. which wanted th RMB to freely float, The Chinese resisted that but allowed for a very small difference between the two currencies on a floating basis (as I recall it was about 8%, but my recollection may be imperfect).

How Much Natural Gas Remains in the USA?

Not only the Haynesville, nut also the Marcellus shale may be a huge play, the borders of which are not yet fully defined. The state of Pennsylvania is giving prospective drillers a hard time in permitting but once that is worked out the Marcellus may be another very large source of gas. In addition to shale and coal bed methane, tight gas is another unconventional source of supply. New techniques such as horizontal drilling make these much more economically recoverable. On the other hand unconventional gas has a faster decline rate than conventional plays at least in the first few years of production, after which it levels off.


On Oct 04 10:46 AM Michael Fitzsimmons wrote:

> i am of course biased, but i believe a much better treatment of this
> subject can be found in this article:
>
> seekingalpha.com/artic...
>
>
> i have not heard many credible experts say we have "hundreds of years
> worth of natural gas reserves" (key there is the "s" on the end of
> hundreds), but i have heard 100 years worth, and would agree with
> that estimate. further, considering the haynesville shale may well
> turn out to be the 4th largest nat gas field in the world, and the
> economic recovery of many other shale regions, and that nat gas production
> is dominated by small independents (and therefore cannot be controlled
> as easily as oil), i don't think you'll see big runs in nat gas prices
> (inflation adjusted) for quite some time. i add "inflation adjusted"
> to that comment because, at the rate the fed and treasury are working
> (unconstitutionally) to print US dollars as fast as they can, we're
> guaranteed to see prices of EVERY commodity go higher in the years
> to come. all this aside, you won't see natural gas prices off a boom-bust
> yo-yo until the US does what it should so obviously do to solve the
> economic, environmental, and national security issues as a result
> of its 60% addiction to foreign oil: adopt natural gas transportation.

Brazil: Do Olympics Make It a Better Investment?

How about the Brazilian Real Fund (BZF)? It was a buy before the announcement and certainly afterward as well.

Should You Invest in Banking Stocks?

A major concern is that under prospective, new financial regulations capital requirements will be more stringent, necessitating more capital raises and thus further dilution on the part of all banks, including C and BAC.

Now's the Time (Relatively) for Natural Gas

If storage is going to be filled, why not buy an MLP in that business? NRGY for example with its salt caverns in the Marcellus shale.


On Sep 08 05:42 PM Mad Hedge Fund Trader wrote:

> poim. Just when I get comfortable with my view on Natural Gas, I
> get a scratchy, reverberating cell phone call from one of the major
> formations telling me that I’m being way too bullish. Gas won’t bottom
> at $2. The free fall will continue until it hits $1. National storage
> will be completely full imminently top out, and when it does, the
> producers will have to shut down completely. Since these guys are
> leveraged up the wazoo, this will trigger a string of bankruptcies,
> and the majors will fall like dominoes. A hedge fund bust won’t define
> this bottom, as these guys are all playing from the short side. UNG
> can’t step in as a buyer of last resort, as the SEC won’t let it
> issue more stock, and the current shares are trading at a ridiculous
> 20% premium. One thing we do agree on is that the bottom will look
> ugly, whatever the spark is. You often get Armageddon type views
> near market bottoms, but this guy has been dead on right until now.
> Well, it takes two to make a market. Conclusion: keep NG nailed to
> your screen, as the widow maker is where the volatility lives.

Natural Gas Production Outlook: Decreases Are in the Offing

Excellent analysis. I only hope that the real world does follow the math.

Another Natural Gas Bull Sticks His Neck Out

Agreed. In fact many of the mid-streams have the vast majority of their revenues from fee based services (pipelines, treating, fractionation, processing, etc. ), and if one is really bearish on gas look at NRGY with its massive storage facilities and salt caverns in the Marcellus play.


On Sep 03 02:12 PM mplaut wrote:

> Play NG with MLPs that are hedged and producing a lot of NG. They
> pay a distribution and although they will probably not rocket up
> as much as some of the more leveraged players, they are safer and
> will probably have nice gains. JMO.

5 Things You Need to Know When Analyzing Corporate Debt

If/when inflation rears its ugly head, the debtor will be paying off the debt with cheaper, devalued dollars than those it borrowed.


On Sep 02 07:52 AM traden4alpha wrote:

> Excellent Post!
>
> First, one can also think about the duration of any debt relative
> to the cash assets and cash-flow of the company. All debts must
> be repaid (or rolled into new debt) and that creates risk if the
> company does not have enough cash to repay the debt. This crisis
> shows that companies can't assume that credit will always be easy
> to get. And if/when inflation rears it's ugly head, then rolling
> a debt might become extremely expensive. The point is that if a
> company has debt that's due in 5 years, for example, it should be
> creating cash-flow sufficient to repay the principal on that debt
> in 5 years.
>
> Second, equity investors are last in line for the profits and assets
> of the company. The greater the debt, the longer the line of claimants
> standing in front of the equity investor. That's why equity investors
> need to think carefully about indebted companies.

Master Limited Partnerships for Your Portfolio: Three Key Questions and Answers

One point of interest is that NMM, which I hold, has distributions which are only 35.89% return of capital, whereas those from EPD, which I also own, are 90% returns of capital, as are those from TPP, which I also own and which is being acquired by EDP. I also own LINN and CPNO and ETP and ETE, which give rise to distributions which are 100% returns of capital, and NS and INRGY the distributions from which are 80% returns of capital. All are solid payers. I also own KYE in a qualified plan. It yields over 13% at my cost and since it is in a qualified plan the fact that distributions are in part a return of capital (as I recall about 65%) is not significant to me.

The Energy Markets According to Stupak

Has anybody explained to Stupak that commodities are traded world-wide and that restrictions on US trading will simply redirect trading to London, Hong Kong, Singapore, Malaysia, etc?

3 Energy MLPs for the Price of One

Energy Transfer Equity (ETE) is in fact the general partner for Energy Transfer Partners (ETP). ETE also owns a large percentage of the limited partnership units (I believe around 70%) of ETP and it also receives incentive distribution rights from ETP. TEPPCO (TPP) is about to merge into Enterprise Product Partners (EPD).
Distributions from ETE and ETP (and also LINE, referred to by one reader, above) are 100% returns of capital and are therefore entirely tax-deferred. Distributions from EPD and TPP are 90% returns of capital and 90% tax deferred.

Why I'm Exiting Greenhill & Co.

If the issue is a secondary only, with shares being sold by shareholders and no new shares issued by the company, then the existing shareholders are NOT being diluted.