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October Summary: The Oil Well Services & Equipment sector finished the month up 3.62% year-to-date [vs being up 4.68% at the end of September] with a sector average yield of 6.60% [vs a yield of 6.45% at the end of September - a rise of 15 basis points]. The Oil & Gas Operators sector finished the month up 1.14% year-to-date [vs 1.20% at the end of September] with a sector average yield of 6.74% [vs 6.56% at the end of last month - a rise of 18 basis points. The elimination of GTM distorted on the high side the change in basis points. In Septmenber GTM paid the second highest yield in this sub-sector and paid 21 basis points higher than sub-sector average.]. The Propane sector finished the month up 4.46% year-to-date [vs 5.37% at the end of last month] with a sector average yield of 7.29% [vs 7.29% last month]. The 10-year Treasury note yielded 4.06% [vs 4.19% last month - down 13 basis points]. BPL Raises Distribution press release of 10-28 Buckeye Pipe Line Company reported financial results for the third quarter of 2004. Revenue in the third quarter of 2004 increased to $82.0 million from revenue of $70.0 million reported in the third quarter of 2003. Operating income increased 3.1% in Q3 to $29.9 million from $29.0 million achieved in Q3-03. The Partnership's Q3-04 net income was $20.6 million or $0.71 per unit compared with a net loss of $25.9 million or $0.89 per unit, after a $45.5 million or $1.57 per unit special charge relating to the prepayment of indebtedness, in Q3-03. During Q3-04, the Partnership reclassified certain revenue and expense and recorded the amounts on a "gross" basis as opposed to a "net of cost" basis. This reclassification, which had no impact on operating income or net income, increased revenue by $4.0 million and increased operating expense by $4.0 million. Pipeline volume for the third quarter of 2004 was 1,151,000 barrels per day. Gasoline volumes decreased by 3.8 percent, and distillate volumes decreased by 0.5 percent, while jet fuel volumes increased by 5.8 percent compared to third quarter 2003 results. Costs and expenses for the third quarter 2004 were $52.1 million compared to $41.0 million for the third quarter of 2003. During the third quarter 2004, expense increases were primarily related to increases in construction activity. The Board of Directors of Buckeye Pipe Line Company LLC also declared a regular quarterly partnership cash distribution of $0.675 per limited partnership unit payable November 30, 2004, to unitholders of record on November 8, 2004. This cash distribution represents a quarterly increase in the distribution of $0.0125 per limited partnership unit to an indicated annual cash distribution level of $2.70. This is the 71st consecutive quarterly cash distribution paid by the Partnership, and the third increase in the cash distribution this year. William H. Shea Jr., Chairman, President and Chief Executive Officer of the general partner said "We are also pleased to have closed on our acquisition of 5 petroleum products pipelines and 24 petroleum products terminals in the Midwestern United States from Shell Oil Products US on October 1, 2004, and to have successfully concluded the subsequent public debt and equity offerings, the proceeds from which were used to repay short-term borrowings which had been used to purchase the Midwest pipeline and terminal assets. The integration of these newly acquired assets with Buckeye's existing infrastructure is proceeding smoothly." EEP Reports Improved 2004 Third Quarter Results press release of 10-22 Enbridge Energy Partners reported increased net income for the three months ended September 30, 2004 of $27.6 million, or $0.39 per unit, compared with $23.5 million, or $0.38 per unit, for Q3-03. For the first nine months of 2004, net income was $96.6 million, or $1.45 per unit, compared with $79.4 million, or $1.39 per unit, for the first nine months of 2003. The Q3-04 and year-to-date results were reduced $12 million, or approximately $0.22 per unit, due to an unexpected rate refund order pertaining to the Partnership's Kansas Pipeline System. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) were $81.5 million and $68.3 million, respectively for Q3-04 and Q3-03. EBITDA was $251.6 million and $214.0 million, respectively for the first nine months this year and last. Enbridge Partners also declared a cash distribution of $0.925 per unit payable November 12, 2004 to unitholders of record on November 1, 2004. Dan C. Tutcher, President of the Partnership's management company and general partner, commented, "The Partnership recorded a substantial $16.6 million increase in comparative third quarter operating income, which reflected both success with our acquisition strategy and capitalization on our organic growth opportunities. Assets acquired in the last year, primarily the North Texas natural gas system and the Mid-Continent crude oil system, accounted for about 60% of the increased operating income. Improved performance of existing assets accounted for the remaining 40% of the increase, as both our crude oil and natural gas businesses had higher volumes and better per unit revenue." Tutcher continued, "Naturally, we were disappointed with the Federal Energy Regulatory Commission ("FERC") Order on Remand for the Kansas Pipeline System's initial rates and that FERC has reversed prior decisions in this complex case. The FERC has now concluded that Kansas Pipeline is obligated to make refunds to affected shippers. The Partnership is exploring its options, including requesting a re-hearing." During the third quarter, the Partnership continued to progress on a number of previously announced expansion projects. All necessary right-of-ways and permits were secured and ground was broken for the new $150-million natural gas transmission line and gathering laterals on the East Texas System. Approximately 80% of the initial 500 MMcf/d transmission line capacity has been subscribed. The transmission line, which is expandable to approximately 1.0 Bcf/d with the addition of compression, is on schedule for start-up in the second quarter of 2005. The first gathering lateral, which will feed the new transmission line when it is complete, was recently placed in service. This $12-million, 30-mile extension immediately increased gathering volumes for the East Texas System by 80 MMcf/d and is expected to attract an additional 25 MMcf/d over the next few years. Construction commenced on the 100-MMcf/d Anadarko System processing plant expansion. However, the strong growth profile for the Anadarko Basin has caused the Partnership to consider increasing the scale of the new processing plant by up to 50%. As a result, the initial start date for the project has been re-scheduled to early 2005. Depending on the final capacity specifications for the plant and associated inlet and outlet facilities, the estimated project cost is between $34 million and $48 million. Commercial commitments were finalized for the $28-million first stage of the Mid-Continent System project to add 2.3 million barrels of crude oil storage by late 2005. The Partnership is continuing discussions with customers relating to long-term commitments to support the $18-million second stage, due to add 1.4 million barrels of storage in 2006. Tutcher elaborated, "The current inventory of core-system expansion projects resulted from our disciplined approach of acquiring assets in promising locations and then applying our experience to expand the initial footprints. We believe there are numerous additional expansion opportunities in the producing regions in which we are established. Furthermore, the market for acquiring energy transportation assets is currently quite active and there is potential for the Partnership to add significant complementary assets to its portfolio." MMP Reports Record Net Income press release of 10-28 Magellan Midstream Partners reported record quarterly net income of $30.6 million for third-quarter 2004 compared to $22.3 million for third-quarter 2003, representing a 37 percent increase. Operating profit increased to $39.2 million during third-quarter 2004 from $31.8 million in the corresponding 2003 period, for a 23% increase. "Demand for the services we provide continues to be strong, fueled in part by the improving U.S. economy," said Don Wellendorf, chief executive officer. "The quarter also benefited from two acquisitions and lower interest costs resulting from a debt refinancing completed earlier in the year." An analysis of variances by segment comparing third-quarter 2004 to third- quarter 2003 is provided below based on operating margin, a financial measure that reflects operating profit before general and administrative (G&A) expenses and depreciation and amortization: Petroleum products pipeline system. Pipeline operating margin was $44.1 million, an increase of $1.9 million. The current quarter benefited from higher diesel and jet fuel transportation volumes due to increased market demand, increased earnings from the partnership's March 2004 investment in the Osage pipeline and higher ancillary revenues. Operating expenses increased between periods primarily due to less favorable product loss allowances and increased power costs associated with higher transportation volumes. Petroleum products terminals. Terminals operating margin was $14.9 million, an increase of $5.2 million. The 2004 period benefited from higher utilization and rates at the partnership's marine terminals and additional earnings from the ownership interests in 14 inland terminals that were acquired in January 2004. Increased throughput at the partnership's other inland terminals and higher ancillary revenues further contributed to the positive variance. Ammonia pipeline system. Ammonia operating margin was $2.9 million, an increase of $0.5 million. The increase was primarily due to lower operating expenses resulting from favorable property tax assessments during the current period. Transportation volumes were essentially flat between periods. Reported diluted earnings per limited partner unit were 96 cents during Q3-04 compared to 84 cents during 2003. Analyst expectations for the current quarter averaged 87 cents per unit. Management currently expects earnings for Q4-04 to be 95 cents per unit and is increasing its earnings guidance for the full-year 2004 excluding refinancing costs to $3.90 per limited partner unit. The refinancing costs resulted from the partnership's May 2004 refinancing plan and are expected to impact the full year by approximately 48 cents per unit. Therefore, management currently expects reported annual earnings per limited partner unit including these costs to be $3.42 per unit. PAA Declares Increased Distribution press release of 10-22 Plains All American Pipeline announced a cash distribution of $0.60 per unit ($2.40 per unit on an annualized basis) on all of its outstanding limited partner units. The distribution will be payable on November 12, 2004, to holders of record of such units at the close of business on November 2, 2004. The distribution represents an increase of approximately 9.1% over the November 2003 distribution and approximately 3.9% over the August 2004 distribution. [Note: PAA reprots earnings on 11-02 with CC on 11-03.] PPX Declares Increased Distribution press release of 10-27 Pacific Energy Partners announced net income for the three months ended September 30, 2004, of $9.9 million, or $0.33 per diluted limited partner unit compared to $6.9 million, or $0.30 per diluted limited partner unit in Q3-03. The results of the current quarter reflect three acquisitions: the Pacific Terminals storage and distribution system, which was acquired on July 31, 2003; the Rangeland Pipeline system, which was acquired on May 11, 2004; and the Mid Alberta Pipeline ("MAPL"), which was acquired on June 30, 2004. Pacific Terminals experienced an increase in storage and distribution revenues due to increased storage capacity and higher utilization. The quarter also reflects the benefit of increased volumes and revenue on our Rocky Mountain pipelines. Partially offsetting these increases were lower gathering and blending margins of Pacific Marketing and Transportation ("PMT"). For the nine months ended September 30, 2004, recurring net income was $30.0 million, or $1.05 per diluted limited partner unit, compared with $18.6 million or $0.84 per diluted limited partner unit for the nine months ended September 30, 2003. Acquisitions and increased Rocky Mountain volumes, partly offset by lower West Coast pipeline volumes, accounted for the increase in net income per unit. Recurring net income for the nine months ending September 30, 2004 excludes a $2.9 million non-recurring financing expense. Of that expense, $2.3 million was a non-cash write-down of previously deferred financing costs, and $0.6 million was a cash payment to terminate interest swap agreements, both associated with our $250 million bond offering in June 2004 and repayment of our term loan. Including the non-recurring financing expense, net income for the nine months ended September 30, 2004 was $27.1 million or $0.94 per diluted limited partner unit. On October 22, 2004, the Partnership announced a cash distribution of $0.4875 per unit for the third quarter of 2004. The distribution will be paid on November 12, 2004, to record holders as of November 1, 2004. Distributable cash flow available to the limited partners' interest for the third quarter of 2004 was $16.0 million. On a weighted average and diluted basis, there were 29,682,000 limited partner units outstanding during the third quarter of 2004, approximately 31% more units outstanding than in Q3-03. The Partnership is announcing today that it expects, subject to final board approval, to increase its quarterly distribution rate to $0.50 per unit beginning with the fourth quarter 2004 distributions payable in February 2005. This would represent an increase of 2.6% over the current distribution level. In addition, the Partnership has previously announced that it expects to increase its distribution by 5% upon completion of its originating terminal and pump station in Edmonton, Alberta with the resultant expected increase in volumes. Completion of the Edmonton facility is expected by the end of the third quarter of 2005. "We are delighted to announce this distribution increase," stated Irvin Toole, Jr., President and CEO. "It demonstrates that we are making progress in growing and strengthening both of our strategic asset groups. Our West Coast segment is realizing the value of the Pacific Terminals storage and distribution system. Our Rocky Mountain segment is experiencing increasing volumes on the Western Corridor and Salt Lake City Core systems, and we remain extremely excited about the growth prospects for our recently acquired Canadian pipelines." Mr. Toole continued, "For the fourth quarter of 2004, we are forecasting net income of $0.30 to $0.34 per unit. For full year 2004, we expect recurring net income per unit to be in the range of $1.34 to $1.38 per limited partner unit. This revised guidance level primarily reflects lower fourth quarter volumes on the Partnership's pipelines from the San Joaquin Valley to Los Angeles, as a result of the recent announcement by Shell Oil that it will continue to operate its Bakersfield refinery through March 31, 2005, to allow time to consider purchase proposals for the facility." SXL Declares Increased Distribution press release of 10-20 Sunoco Logistics Partners announced net income for Q3 ended September 30, 2004 of $12.8 million, or $0.50 per limited partner unit on a diluted basis, compared with $16.9 million for Q3-03, or $0.72 per limited partner unit on a diluted basis. For the nine months ended September 30, 2004, net income was $43.8 million compared with $46.6 million for the nine months ended September 30, 2003. Sunoco Partners LLC, the general partner of Sunoco Logistics Partners L.P., also declared an increased cash distribution for Q3-04 of $0.6125 per common and subordinated partnership unit ($2.45 annualized) payable November 12, 2004 to unitholders of record on November 1, 2004, an increase of $0.025 per partnership unit on a quarterly basis ($0.10 annualized increase). "Our results for the third quarter were impacted by several events," said Deborah M. Fretz, President and Chief Executive Officer. "Ratable cash flow continues to be strong with the inclusion of a one-third interest in the Harbor Pipeline for the full quarter as well as the acquisitions made in the first half of the year. We are confident that the business will continue to produce ratable cash flows and, therefore, we are declaring a 4.3 percent increase in our quarterly distribution to $0.6125 or $2.45 annually. This increase represents our sixth consecutive quarterly distribution increase." The Partnership also recently announced two important transactions: the $8 million acquisition of an approximately 160,000-thousand-barrel terminal located in Columbus, Ohio, which is expected to be immediately accretive upon the closing of the transaction, estimated to be within the next 60 days; and effective January 1, 2005 the operatorship of the West Texas Gulf Pipe Line, a 579-mile crude oil pipeline, originating from the West Texas oil fields, at Colorado City, Texas and the Partnership's Nederland, Texas crude oil import terminal, extending to Longview, Texas where deliveries are made to several pipelines, including the Mid-Valley Pipeline. The Partnership is the largest shareholder in West Texas Gulf, having acquired its 43.8 percent interest in November 2002. Net income for the third quarter 2004 decreased $4.1 million from the prior year quarter to $12.8 million due to the impact of a turnaround at Sunoco, Inc.'s Marcus Hook refinery, higher Eastern and Western Pipeline System operating and maintenance expenses, weaker Western Pipeline System lease acquisition margins, and costs related to complying with Sarbanes-Oxley, partially offset by the operating results of recent acquisitions. For the nine months ended September 30, 2004, net income decreased $2.7 million to $43.8 million due mainly to higher Eastern Pipeline System operating and maintenance expenses, lower Western Pipeline System lease acquisition margins, and costs related to complying with Sarbanes-Oxley, partially offset by the operating results from the acquisitions and higher revenues at the Nederland Terminal. Eastern Pipeline System Operating income for the Eastern Pipeline System decreased $2.3 million to $7.8 million for the third quarter 2004 from $10.1 million for the third quarter 2003. Sales and other operating revenue increased from $24.1 million for the prior year's third quarter to $24.5 million for the third quarter 2004 due mainly to an increase in total shipments, partially offset by lower revenue per barrel mile. The increase in shipments was principally the result of higher crude oil throughput on the Marysville to Toledo pipeline and higher refined product throughput on the Harbor Pipeline, partially offset by a four- week, planned turnaround at Sunoco, Inc.'s Marcus Hook refinery in September 2004. The increase in volume on the Harbor Pipeline was due mainly to the acquisition of an additional one-third ownership interest in late June 2004 and Sunoco, Inc.'s January 2004 purchase of the Eagle Point, New Jersey refinery. Total expenses increased from $17.6 million for the prior year's third quarter to $20.2 million for the third quarter 2004 due principally to an increase in scheduled maintenance costs and product line losses caused by meter inaccuracies which have been remedied. In addition, total expenses increased due to the inclusion of an additional one-third interest in the Harbor Pipeline. Terminal Facilities The Terminal Facilities business segment had a $0.9 million increase in operating income to $8.8 million for the third quarter 2004 from $7.9 million for the prior year's third quarter. Total revenues increased $3.5 million to $28.1 million for the third quarter 2004 due primarily to the acquisition of the Eagle Point logistics assets from Sunoco, Inc. on March 30, 2004 and the purchase of two refined product terminals from ConocoPhillips located in Baltimore, Maryland and Manassas, Virginia on April 28, 2004. Operating expenses increased $1.8 million to $12.5 million for the third quarter 2004 due principally to the expenses associated with the acquired assets and an increase in scheduled tank maintenance costs at the Nederland Terminal. Depreciation and amortization increased $0.7 million to $3.6 million for the third quarter 2004 due mainly to the inclusion of the acquired assets. Western Pipeline System Operating income for the Western Pipeline System decreased $2.8 million to $1.3 million for the third quarter 2004 from $4.1 million for the third quarter 2003. The decrease was primarily the result of an increase in scheduled pipeline maintenance and integrity management expenses, lower lease acquisition volumes and margins, and the absence in the current period of a gain on sale of crude trucks. Total revenues and cost of products sold and operating expenses increased in the third quarter 2004 compared with the prior year's third quarter due primarily to an increase in the price of crude oil, partially offset by a decline in lease acquisition and bulk volumes. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma, increased to an average price of $43.85 per barrel for the third quarter 2004 from $30.22 per barrel for the third quarter 2003. TCLP Announces 2004 Third Quarter Results press release of 10-26 TC PipeLines reported Q3-04 net income of $12.6 million or $0.68 per unit (all amounts in U.S. dollars) compared to $12.0 million or $0.65 per unit in third quarter 2003. For the nine months ended September 30, 2004, the Partnership reported net income of $39.9 million or $2.17 per unit compared to $35.9 million or $1.97 per unit for the same period last year. Cash generated in the third quarter of 2004, including $4.4 million of cash distributed from the Partnership's investments in Northern Border Pipeline Company and Tuscarora Gas Transmission Company classified as a return of capital, increased $4.1 million to $16.9 million compared to $12.8 million in 2003. For the nine months ended September 30, 2004, cash generated, including return of capital from Northern Border Pipeline and Tuscarora, amounted to $50.8 million, an increase of $13.6 million compared to $37.2 million for the same period last year. This increase is primarily due to higher cash distributions from Northern Border Pipeline compared to the prior year reflecting the impact of a change in its cash distribution policy effective January 1, 2004, as well as the negative impact to the second quarter 2003 cash distributions resulting from refunds paid by Northern Border Pipeline to its shippers for electricity costs. These amounts refunded had previously been collected through company-use gas provision. "We continue to be pleased with the financial results generated by our pipeline investments," said Ron Turner, president and chief executive officer of the general partner, TC PipeLines GP, Inc. "The Partnership's third quarter results reflect increased income and cash flow from both our investments in Northern Border Pipeline and Tuscarora relative to the same period last year." TPP Partners Reports Third Quarter 2004 Results press release of 10-27 TEPPCO Partners (TPP) reported net income for Q3-04 of $25.9 million, or $0.29 per unit, compared with net income of $30.5 million, or $0.36 per unit for Q3-03. Net income for the nine months ended Sept. 30, 2004, was $104.1 million, or $1.18 per unit, compared with $98.4 million, or $1.21 per unit for the nine months ended Sept. 30, 2003. The three-month and nine-month periods ended Sept. 30, 2004, include a non-cash asset impairment charge of $4.4 million. The weighted-average number of Limited Partner units outstanding for third quarter and nine months ended Sept. 30, 2004, was 63 million for both periods, compared with 60.5 million and 58.7 million Limited Partner and Class B Units, respectively, for the corresponding 2003 periods. The weighted-average number of Limited Partner units outstanding reflects 5.3 million units issued during third quarter 2003. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $78.9 million for third quarter 2004, compared with $78.6 million in third quarter 2003. EBITDA was $257.9 million for the nine months ended Sept. 30, 2004, compared with $250.6 million in the prior year period. KMP Increases Distribution press release 10-20 Kinder Morgan Energy Partners announced an increase in the Q3 cash distribution per common unit to $0.73 ($2.92 annualized). Payable on Nov. 12, 2004, to unitholders of record as of Oct. 29, 2004, the distribution represents an 11 percent increase over the third quarter 2003 cash distribution per unit of $0.66 ($2.64 annualized). KMP reported record net income of $217.3 million for Q3, or $0.59 per limited partner unit, up 25 percent from $174.2 million, or $0.49 per unit, for the comparable period last year. For the first nine months of the year, net income was $604.3 million compared to $513.6 million for the same period in 2003. Chairman, CEO and President Richard D. Kinder said, "We are delighted with KMP's financial performance in the third quarter, which was driven by strong internal growth and contributions from acquisitions that closed since the end of the third quarter of 2003. Quarterly net income reached an all-time high, and we increased the distribution for the 21st time in KMP's history." The current distribution of $0.73 ($2.92 annualized) is about 4.6 times higher than the distribution rate of $0.1575 ($0.63) when KMP was formed in February 1997. All four of KMP's business segments reported increased earnings before DD&A quarter over quarter, and total segment earnings before DD&A are up almost 19 percent through September compared to the same period last year. For the first three quarters, KMP generated distributable cash flow in excess of distributions of approximately $31.6 million, already exceeding our 2004 published annual budget target of $28 million. "Beyond the strong current performance, we continue to position KMP for future growth by investing in infrastructure across the United States to help meet growing energy demand," Kinder said. "Year to date, KMP has announced approximately $320 million in acquisitions, and our budget calls for more than $600 million in capital expansion projects this year." Outlook KMP expects to declare cash distributions of at least $2.86 per unit for 2004, revised upward from its original 2004 budget of $2.84 per unit. KMP's distribution per unit of $0.73 ($2.92 annualized) is already within its budgeted year end range of $2.90 to $2.94. NBP Reports Third Quarter Results and Updates Guidance press release 10-26 Northern Border Partners reported Q3-04 net income of $34.7 million, or $0.69 per unit, compared to a loss of $183.7 million, or a loss of $3.92 per unit in Q3-03. Year-to-date 2004, Northern Border Partners reported net income of $104.6 million, or $2.08 per unit, as compared to a loss of $118.9 million, or a loss of $2.72 per unit for the same period in 2003. As reported earlier, Q3-03 net income reflected non-cash charges of approximately $219 million to reflect asset and goodwill impairments for the gathering and processing segment. Excluding the effects of this impairment charge, the 2003 third quarter and year-to-date net income would have been $35.4 million ($0.70 per unit) and $100.1 million ($2.05 per unit), respectively. Cash flows as measured by earnings before interest, taxes, depreciation, and amortization (EBITDA) increased to $88.1 million in the third quarter 2004 from $86.8 million in the third quarter of 2003. Year-to-date 2004 EBITDA was $266.5 million compared to $259.2 million for the same period one year ago. Third quarter 2004 results were positively impacted by higher prices of both natural gas and natural gas liquids in the Partnership's Williston Basin gathering and processing business as well as slightly higher volumes in this area. Also contributing to the 2004 third quarter was a gain of $3.2 million on the sale of certain gathering assets in the Powder River Basin. Additionally, the Partnership reduced its reserves for uncollectible accounts by $1.8 million as a result of the current status of its bankruptcy claims against Enron Corp. and Enron North America. Results for the third quarter of 2003 included income from a $3.3 million payment received for a change in ownership of the other partner in Bighorn Gas Gathering, L.L.C. Delivered volumes in the Partnership's interstate natural gas pipelines segment increased during third quarter 2004 to 272 billion cubic feet (Bcf) versus 266 Bcf for the third quarter of 2003. Average gathering volumes increased to 1,220 million cubic feet per day (MMcf/d) during the third quarter 2004 compared to 1,058 MMcf/d for the third quarter 2003. Volumes on the Partnership's wholly-owned gathering systems in the Powder River Basin increased to 216 MMcf/d in the third quarter of 2004 from 212 MMcf/d in third quarter 2003. Gathering and processing volumes in the Williston Basin increased to 56 MMcf/d for the third quarter of 2004 from 54 MMcf/d in the third quarter 2003. "During the third quarter our businesses generated solid results. We continue to be pleased with the financial results generated by our interstate pipelines and our gathering and processing business in the Williston Basin. Operating results from our Williston assets were excellent due primarily to strong natural gas and liquids prices," said Bill Cordes, chairman and chief executive officer of Northern Border Partners. "Also, the sale of a small, non-strategic gathering system in the Powder River Basin provided us with additional income this quarter," said Cordes. On October 19, 2004, the Partnership Policy Committee declared the Partnership's quarterly cash distribution of $0.80 per common unit for the third quarter of 2004. The indicated annual rate is $3.20. The distribution is payable November 12, 2004 to unitholders of record October 29, 2004. The Partnership is again increasing its earnings and EBITDA guidance for 2004. Net income is expected to be in the range of $135 million to $138 million or $2.69 to $2.75 per unit. EBITDA is now anticipated to be approximately $350 million to $357 million. Distributable cash flows (DCF) are expected to be $184 million to $189 million or $3.72 to $3.83 per unit. The Partnership is also initiating guidance for 2005. Net income is expected to be in the range of $126 million to $131 million ($2.50 to $2.60 per unit). EBITDA is anticipated to be approximately $345 million to $355 million. Projected net income for 2005 is expected to be essentially the same as 2004 when the effects of several non-recurring events are excluded. These events include resolution of Enron-related items for bankruptcy claims and cost allocations; Powder River Basin asset sales; and property tax adjustments. Distributable cash flows for 2005 are expected to be $174 million to $182 million or $3.50 to $3.70 per unit. An integral assumption underlying the expectations for 2005 is fully recontracting Northern Border Pipeline at maximum rate levels. Northern Border Pipeline has a significant amount of capacity, approximately 725 MMcf/d, under contracts that expire in the spring of 2005. Northern Border Pipeline is aggressively marketing this capacity; however, it is possible that natural gas price differentials between Western Canada and the Mid-Continent may not be great enough at certain times of the year to support maximum rate levels. Consequently, the Partnership believes a reduction in expected 2005 net income and cash flow of $5 million to $10 million is possible. The impact on net income and cash flow may vary outside this range depending on actual natural gas price differentials experienced during the year. "During the third quarter we have achieved other important accomplishments including recontracting capacity on Northern Border Pipeline for the 2004-2005 winter period, finalizing the contractual support for two internal growth projects on our interstate pipelines and initiating construction of an expansion on our Williston Basin assets," Cordes said. ETP Acquires Trenton Propane press release of 10-14 Energy Transfer Partners announced the acquisition of the assets of Trenton Propane, Trenton, Texas, for a combination of cash and ETP common units, by its retail propane division, Heritage Propane. Trenton Propane delivers approximately 2.0 million gallons annually in the market north of Dallas. [ETP] Heritage awarded $48 million in Damages Reuters 10-22 Energy Transfer Partners on Friday said its operating partnership Heritage Operating L.P. had been awarded $48 million in damages in a previously disclosed lawsuit. Energy Transfer said the jury had found in favor of Heritage on all four claims against SCANA Corp., Cornerstone Ventures L.P. and Suburban Propane L.P. NRGY Increases Distribution press release of 10-26 The Board of Directors of Inergy announced an increase in the company's quarterly cash distribution to $0.425 per limited partner unit ($1.70 annually) for the quarter ended September 30, 2004. This represents a 2.4% increase over the prior quarter and an increase of 10.4% over the distribution for the same quarter of the prior year. The distribution will be paid on November 12, 2004 to unitholders of record as of November 5, 2004. The Inergy, L.P. common unit ex-dividend date will be November 3, 2004. Propane Sellers Fall Cynthia Schreiber, DowJones Newswires 10-19 Providers of heating oil and propane tumbled, led by Star Gas Partners, which plummeted $17.28, or 80%, to $4.32 on the New York Stock Exchange. The company said the inability to pass on the full impact of high heating-oil prices to customers may prompt a default under borrowing conditions, a substantial decline in earnings and possible bankruptcy proceedings. Other decliners were Ferrellgas Partners, which slid 1.89, or 8.6%, to 20.10, and Suburban Propane Partners, which lost 2.96, or 8.4%, to 32.47, both on the New York Stock Exchange. Inergy shed 78 cents, or 3%, to 25.37. Investors in Star Gas Could've Used a Few Naysayers Herb Greenberg, CBS MarketWatch.com 10-20 If only there were no short-sellers. Oh, really? Everybody loves to hate short-sellers until their warnings turn out to be true. Short-sellers sell borrowed stock in hopes of buying it back later at a lower price. But no matter how many Enrons, Sunbeams or Lernout & Hauspies there may have been -- all of which were first brought to light by short-sellers, investors appear to have selective memory. Or at least they think short-sellers are OK as long as they don't wind up snooping around any of their companies. But let's go back to the notion about what the world would be like if short-sellers disappeared. There's no better example then Stamford, Conn.- based Star Gas Partners, which delivers heating oil and propane gas to homes. Until earlier this week, it was one of those stocks individuals loved, with a dividend yield of around 10 percent. It had little in the way of institutional ownership, but was also off the radar of short-sellers, based on short interest, which was less than a half percent of the total float. (Which in retrospect, is surprising given the company's high debt and its status as an acquisitive rollup in an industry as fundamentally challenged as home heating oil.) Short-sellers are often sources for reporters, which itself is often the topic of controversy. Not that it should be, because to think reporters are running stock screens and randomly poring over SEC filings to spot potential "needle-in-a-haystack" stories is ludicrous. More often than not, stories are sparked by news or tips, and the tips come in all shapes and sizes: from employees, investors, brokers, brokerage analysts and short-sellers. I make no excuses for talking to short-sellers. What, reporters should only talk to longs? The idea is to get ahead of the news, and short-sellers are among the best sources because their research is often the most impeccable, which is required if you're going against the grain. In the case of Star, with no short-sellers involved, there was nobody to alert reporters that maybe -- just maybe -- a company with a high dividend yield that attracted individuals looking for an alternative to puny money market payouts might be having problems. The stock was no doubt viewed as a steady Eddie that had been humming along for years, give or take a few dollars, at around $20 per share. It boasted a stock market value of more than $700 million. The dividend, meanwhile, has been 57.5 cents per quarter for as long as anybody can remember. Then came the company's second-quarter earnings report on July 29. This should have been the wake-up call of all wake-up calls for investors. If not the earnings report, then certainly the conference call with analysts should've been like fright night. The company announced at the bottom of its earnings release that because of issues at its oil heating unit, which generates the bulk of revenues, it thought it would be "prudent not to declare" a distribution (or dividend) on its senior subordinated, junior subordinated and general partner units. ("Prudent not to declare" the dividend? So what if it was a few issues of debt. Talk about red flags!) On the earnings call, several analysts pushed management hard about its cash position, debt and other obligations. Subsequently, some of them sliced their ratings to the equivalent of "sell." The company's sister stock, which hold the senior subordinated debt and trades under the ticker symbol "SGH," lost nearly half its value on the news. While the analysts did a good job downgrading the regular common stock, their message didn't get out because the stock was owned mostly by individuals. They wouldn't know what happened unless their brokers had called them -- or unless they were savvy enough to have read the earnings report and then understood what the company had said. Most obviously didn't get the call or certainly weren't savvy enough. That's evident by the relatively stable performance of the regular stock's shares: While volume rose, the increase was small relative to the shares outstanding. The price, meanwhile, dropped just a few points as if this were no big deal. Then, on Oct. 18, reality hit. That's when Star announced that the oil division was in violation of bank lending covenants. It appears that the one-two punch of not being able to pass along the full impact of rising oil prices to customers combined with high customer attrition was simply too much of a strain. As a result, Star was forced to suspend dividend payments and warned that if its bankers don't help out it could be forced to find additional financing "on extremely disadvantageous terms." It also said that it could "even" be forced to file for bankruptcy. With the collapse of its stock, its market value was now less than $200 million. It was a story any short-seller would've loved. But with none involved, one of the most likely sources to tip off the press didn't exist. What's worse, without short-sellers -- whose buying often acts as a cushion to soften the fall -- Star's stock plunged in a vacuum, losing more than three-fourths of its value in a single day. Sounding too much like an apologist for short-sellers? A shill, maybe? Nah, I'm just upset I didn't know about Star. Not only did investors lose their principal, but they lost a healthy stream of income, as well. It's a lesson holders of every high-yielding stock or any stock fortunate enough to have a few shorts whispering to the press should remember, because what happened to Star could happen to them, too. Can the shorts be wrong? Absolutely. But if the shorts are right, at least investors can't claim they weren't warned. After all, as Star proves, companies only tell you after the fact. From Herb Greenberg of 10-27 Man, talk about feeling stupid. In my story on Star Gas and the lack of short sellers in the stock, I wrote that I was miffed I hadn't known about the story in advance. Turns out, I did. And I didn't hear about it from a short seller. Reader Bob C. writes to remind me that he actually wrote me about Star on July 31 -- after it became obvious to everybody but most Star investors that the company was likely to implode. I get so many e-mails and get so busy that even those from good sources wind up falling through the cracks.... |