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On 3-26 I altered the "Earnings Growth & P/E Ratios" spreadsheet to show the 2008 estimates, I changed the "MLP Midstream Forecaster" spreadsheet to include the 2008 DCF and EPS estimates, and I changed the "MLP CAGRs - Why Consensus Estimates Are Not Used Here" spreadsheet to include the 2008 estimates. This resulted in changes in this site's CAGR estimates. And on 3-26 DEP was added to the coverage universe. The spreadsheet below uses month ending data. The 'monthly price change' column is for unit price changes, while the 'year to date' stats is for total return [distributions plus unit price gains]. This explains the jumps in year to date gains in the distribution heavy months of February, May, August and November without similar gains in those month's unit prices. CEF numbers are for MLP and MLP-hybrid Closed-End Funds. The 'Ten Year Yield' numbers are for the US Treasury. Tracking the spread of the average MLP's yield to the Treasury [which I have done since January of 2005] has been a useful tool for timing of MLP purchases - according to this metric, buy MLPs when the spread is high. I have tracked the CEF spread since April 2006, and it is too early to tell if this number is meaningful. A new addition to this data is the CEF Price/NAV ratio, which is used in academia to measure investor sentiment. According to theory, buy MLPs when the price is at the largest discount to NAV.
XTEX Reports Businesswire 3-01 Crosstex Energy, L.P. reported distributable cash flow in Q4-06 of $22.0 million, or 1.06 times the amount required to cover its current distribution of $0.56 per unit. Distributable cash flow in the quarter benefited from a $3.9 million sale of idle equipment. Distributable cash flow was $22.2 million in Q4-05. XTEX's gross margin increased 30% to $73.3 million in Q4-06 from $56.4 million in Q4-05. Gross margin from the Midstream business segment rose $11.5 million, or 25%, to $57.1 million. The improvement was primarily due to a $10.4 million contribution to gross margin from the North Texas Pipeline and related processing facilities that began operations in Q2-06 and the North Texas gathering systems acquired in June 2006 from Chief. Higher volumes on the Louisiana Intrastate Gas system also contributed to the increase. Gross margin from the Treating business segment rose $5.4 million, or 50%, to $16.2 million. The increase was attributable to dramatic growth in the number of treating plants in service and a nonrecurring $1.5 million revenue adjustment related to contractual fee escalations at the nonoperated Seminole plant. There were 160 treating plants in service at the end of Q4-06 versus 112 plants in service at the end of Q4-05. XTEX reported a net loss of $4.9 million in Q4-06, compared with net income of $10.5 million in Q4-05. The net loss per limited partner unit in Q4-06 was $0.34 per unit versus net income of $0.33 per unit in Q4-05. For the full year 2006 DCF was $81.9 million, or 1.02 times the amount required to cover XTEX's distributions of $80.0 million. Distributable cash flow in 2006 increased 27 percent from distributable cash flow in 2005 of $64.6 million. Gross margin in 2006 rose 68% to $272.5 million from $162.5 million. XTEX estimates a 2007 net loss of $2 million to $17 million and distributable cash flow of $83 to $95 million. XTEX currently expects to pay total distributions in 2007 between $2.24 and $2.34 per unit, or a 3% to 7% increase over 2006. XTXI expects to pay dividends in the range of $0.88 to $0.98 per share in 2007, or a 9% to 21% increase over 2006. Crosstex Energy Reports Businesswire 3-01 XTXI reported net income of $0.5 million for Q4-06, compared with net income of $45.1 million for Q4-05. XTXI's net loss before gain on issuance of partnership units, income taxes and interest of noncontrolling partners in the net income of the Partnership was $5.4 million in Q4-06, compared with net income of $10.3 million in Q4-05. The net income in fourth-quarter 2005 was attributable to a noncash net gain after income tax impact on issuance of Partnership units of $37.6 million related to the Partnership's offering of 6.6 million units during the quarter. XTXI's share of XTEX distributions was $11.5 million in Q4-06 compared to $9.4 million in Q4-05. For 2006 Crosstex reported net income of $16.5 million for 2006, compared with net income of $49.1 million for 2005. MWE Reports PRNewswire 3-05 MarkWest Energy Partners, L.P. reported net income of $12.1 million for Q4-06, compared to a net loss of $3.2 million for Q4-05. For 2006, MWE reported net income of $70.1 million compared to net income of $2.4 million for 2005. DCF for Q4-06 was $27.1 million compared to $13.1 million for Q4-05, an increase of more than 105%. For 2006, DCF was $117.9 million, compared to $44.0 million for 2005, an increase of 168%. MWE's total distribution coverage ratio, including the associated GP and IDR requirements, was 1.3x for Q4-06 and 1.6x for 2006. During 2006 MWE entered into significant, long-term agreements to drive further growth and increased profitability, including a strategic agreement with Newfield Exploration associated with their development of the Woodford Shale Play in southeastern Oklahoma and the acquisition of 100 percent of the ownership interest in Santa Fe Gathering, L.L.C. and the Grimes Gathering System located in Western Oklahoma. MWE's Carthage Gas Processing Plant and natural gas liquids ("NGL") pipeline beginning operations in Q1-06. MWE's investment in Starfish Pipeline Company had reported equity income of $5.3 million during 2006 compared to an equity loss of $2.2 million in 2005. MMLP Reports PRNewswire 3-05 MMLP reported net income for Q4-06 of $8.4 million [$0.63/unit] compared to $2.6 million [$0.28/unit] for Q4-05. Revenues for Q4-06 were $149.0 million compared to $144.6 million for Q4-05. Q4-06 net income was positively impacted by $2.5 million of gains from involuntary conversions of property, plant and equipment and gains on sale of property, plant and equipment which increased to net income of approximately $0.20/unit for Q4-06. MMLP reported net income for 2006 of $22.2 million [$1.69/unit] compared to $13.9 million [$1.58/unit] in 2005. Revenues for 2006 were $576.4 million, compared to revenues of $438.4 million for 2005. Net income for 2006 was positively impacted by $3.4 million of gains from involuntary conversions of property, plant and equipment and gains on sale of property, plant and equipment and partially offset by a $1.2 million debt prepayment premium. Together, these items positively impacted net income by approximately $2.2 million [$0.17/unit] for 2006. Distributable cash flow for 2006 was $32.1 million [$2.54/unit?]. TLP Reports Businesswire 3-16 TransMontaigne Partners L.P. reported that Q4-06 revenues rose to $19.282 million from $11.941 million in Q4-05, but net earnings per limited partner unit fell to $0.06 from $0.48. Boardwalk Prices Public Offering Businesswire 3-19 Boardwalk Pipeline Partners announced that it has priced a public offering of 7.5 million common units representing limited partner interests. [There are currently 127.51 million units outstanding.] Lehman Brothers is acting as the sole underwriter for the offering. The closing of this transaction is scheduled for March 23, 2007. CQP IPOs various 3-21 Cheniere Energy Partners, L.P. (a limited partnership recently formed by Cheniere Energy, Inc [LNG]) IPOed on 3-21. Through a wholly-owned subsidiary, Cheniere Energy Partners will develop, own and operate the Sabine Pass LNG receiving terminal currently under construction in western Cameron Parish, Louisiana on the Sabine Pass Channel. Such terminals receive LNG from ships and convert it back into gas. Construction began on the Sabine Pass terminal in 2005, and when it is fully operational in 2008, Cheniere Energy Partners anticipates the terminal will be the largest of its kind in North America. The terminal will boast 4 billion cu. ft.-per-day of regasification capacity as well as 17 billion cubic feet of LNG storage capacity. Three 20-year terminal use agreements have already been signed. Of the 13,500,000 common units being sold, Cheniere Energy Partners will sell 5,054,164 units and Cheniere LNG Holdings, LLC, a wholly owned subsidiary of Cheniere, will sell 8,445,836 units. The offering represents an approximate 8.2% interest in Cheniere Energy Partners. Moody's Hikes MarkWest Ratings Outlook AP 3-27 Moody's Investors Service upgraded the rating outlook on debt issued by MarkWest Energy Partners LP, citing the natural gas company's increased sales and lower debt. Moody's now rates the outlook on the company's debt a 'positive' instead of 'neutral,' which means the ratings agency is likely to boost the company's ratings on $750 million in debt. Moody's said the rosier outlook comes as MarkWest doubled its assets in the last two years to more than $1 billion through acquisitions and internal growth. Earnings before interest, depreciation, amortization and taxes has more than tripled to $167 million. Spectra Energy Files to Form MLP PRNewswire 3-30 Spectra Energy announced that Spectra Energy Partners, LP, a midstream energy master limited partnership formed by Spectra Energy, filed a Registration Statement with the SEC relating to the IPO of 11,500,000 of its common units on the New York Stock Exchange under the symbol "SEP." A subsidiary of Spectra Energy will be the general partner of Spectra Energy Partners, LP and, through its subsidiaries, Spectra Energy will own an approximate 82% interest in the MLP through its general partner and limited partner ownership interest. Spectra Energy Partners, LP will own and operate natural gas transportation and storage assets consisting of interests in two interstate natural gas pipeline systems located in the southeastern United States, interests in two natural gas storage facilities in Texas and Louisiana, and a LNG storage facility in Tennessee. These facilities include [1] East Tennessee Pipeline System - 100% interest [2] Gulfstream Pipeline System - 24.5% interest and [3] Market Hub Storage System - 50% interest. The Fayetteville Shale AP 3-04 In the flicker of five years, the Fayetteville Shale has gone from "just sort of a geologic oddity" to a significant industrial development, says Ed Ratchford of the Arkansas Geologic Commission. Investors, so far, are satisfied with early production. Cleburne County Judge Claude Dill says business at the county courthouse, where mineral rights transactions are recorded, had been so brisk that clerks had to bring in extra tables. Dill himself negotiated a five-year lease on his 60 acres. Leases cover 4,000 square miles across north-central Arkansas, an area just smaller than the 5,000-square-mile Barnett Shale field in northern Texas, which produced 1.2 billion cubic feet of gas per day last year. A gas transmission company plans a pipeline across Arkansas that would carry 1.1 billion cubic feet daily, but developers won't make predictions about the Fayetteville Shale. Houston-based Southwestern Energy did not discover the Fayetteville Shale nor invent the technology to shatter its hold on a buried treasure, but it and its Arkansas subsidiary, SEECO, discovered that it held commercial potential like the Barnett. Also important, Southwestern Energy was willing to place a bet – up to $700 million by the end of last year and another $900 million in 2007 – that new "frac treatment" technology used in the Barnett could also be used here. In 2002 SEECO was a relatively small company, with its principal area of operation in the Arkoma Basin of Arkansas and Oklahoma. For 60 years, the company had been exploring and producing gas from conventional sources – porous rock thousands of feet underground. Gathering gas from unconventional sources like shale was new to the industry. For Southwestern Energy, the Arkoma Basin represented about half the company's gas reserves. As SEECO drilled in the tighter Wedington sandstones of the Arkoma Basin, the company came across some unexpected findings. After analyzing data from 21 wells, John D. Thaeler, a petroleum geologist and SEECO senior vice president, Thaeler and his team couldn't explain the numbers. "We estimated it should contain about 2.2 billion cubic feet (of natural gas). But when we looked at the well performance, we realized those 21 completions were going to produce upward of 17.3 billion cubic feet," Thaeler says. "What it meant to us is that we didn't understand as well as we thought we did where the gas was coming from." At a brainstorming session at SEECO's Fayetteville offices, the lights went on. Thaeler and his team realized the gas in the 30-50 foot thick sandstone could be coming from the surrounding Fayetteville Shale and wondered if the formation could be another Barnett. The team poured over Barnett data and studied drilling records and maps. Samples of the Fayetteville Shale were sent to the same company that had analyzed Barnett, but the team didn't say where the rock came from. In late summer 2002, Thaeler recalls getting the test results back. The analysis indicated encouraging data relative to total organic content, which ranged from 4% to 9.5%, thermal maturity, which ranged from 1.5 to 4.0, and total gas content, which ranged from 60 to 220 standard cubic feet per ton, which we believe compares favorably to other productive shale gas plays, including the Barnett. The response was encouraging, but the SEECO crew knew the Barnett was hundreds of feet thick while the Fayetteville Shale in the basin was not. Over the next year, the company quietly embarked on a campaign to acquire surface and mineral rights beyond the Arkoma Basin. The company used out-of-state land brokers unknown to locals at county courthouses and abstract offices, putting them up in motels off-the-beaten path or near SEECO's Fayetteville offices. The brokers, sworn to secrecy, negotiated the deals and bought the rights for the company while the company remained anonymous. By the end of 2003, Southwestern Energy had spent about $11 million and acquired the rights to about 3,300 acres. With more drilling, the company learned the thicker shale outside the Arkoma Basin was the quality needed for commercial production. In the fall of 2004, SEECO used the new technology to tap natural gas from shale. The rock was fractured and the gas was released."There was no Wedington sand out there so we knew the Fayetteville Shale had the potential to be productive," Thaeler recalls. "Naturally, we started leasing like crazy." Southwestern's public announcement of the well set off a frenzy. Although not as large as the Barnett, the Fayetteville Shale held great promise. Over 21/2 years, about 2.5 million acres were leased. Since then, some 180 wells at an average cost of $2.2 million each have been completed, and Texas Gas Transmission plans to build a 167-mile pipeline to carry 1.1 billion cubic feet of gas a day. Southwestern plans to drill 400-450 wells in 2007 and may eventually have 8,000 operating in the Fayetteville Shale. In all, the company estimates its leases hold 11 trillion cubic feet of natural gas for production. Arkansas has not traditionally been a major gas producer. Meanwhile, the much larger Chesapeake Energy plans to drill 50-75 wells in 2007 and open a field. Schlumberger, a world leader in servicing oil and gas companies, is building a 31,000-square-foot facility in Conway, where Southwestern also has opened up an office and formed DeSoto Drilling Inc. Still, for the Fayetteville Shale venture to work, gas prices and demand will have to remain high and drilling costs and skilled workers will have to be within reach. Production throughout the play will have to be good. And new costly transmission lines will have to be built in time to take advantage of all these variables. Fayetteville Shale: Quick Facts: The Fayetteville Shale in Arkansas is a recently tapped unconventional source of natural gas. The tight, finely grained rock formation, 300 million years old, ranges in thickness from 50 to 550 feet and in depth from 1,500 to 6,500 feet. The "sweet spot," where geologists believe the rock holds the greatest reserve, is in five central Arkansas counties: Cleburne, Conway, Faulkner, Van Buren and White. Houston-based Southwestern Energy began exploration in 2002. The company holds mineral rights on about 887,000 acres and estimates those properties could produce 11 trillion cubic feet of natural gas. Southwestern says it may drill as many as 8,000 wells. Other companies in the shale play and their approximate acreage include: [1] Chesapeake Energy, 1 million acres. [2] Hallwood Energy, 480,000 acres. [3] Maverick Oil & Gas, 125,000 acres. [4] Shell Exploration & Production Co., 70,000 acres. By the end of 2006, about 180 wells were completed in the Fayetteville Shale. State Income Tax Filing Exemptions, Requirements & Information: Partnerships do not pay state income taxes. It is the owners of the partnerships that pay those taxes. That can mean that you will pay income tax to states for which you are not a resident. The following information is from the individual state web sites giving filing reqwuirements for those non-resident having income in their states. Nonresidents are required to file an Oklahoma income tax return when they receive gross income of at least $1,000 of Oklahoma source income. [source: http://www.tax.ok.gov/it1a.html] For Non-Resident Individual Income Tax in Louisiana, there is a Single individual exemption of $4,500 and the Married-joint return and a qualified surviving spouse is $9,000 [source: http://www.revenue.louisiana.gov/sections/individual/indincome.asp#nonresident ] New Mexico's law says every person who has income from New Mexico sources and who is required to file a federal income tax return must file a personal income tax return in New Mexico. Forms To File [1] PIT-1 form (required) is equivalent to the federal form 1040. [2] PIT-B allocation and apportionment schedule (required) allows you to separate New Mexico sourced income from your total federal income and be taxed on only the part that properly belongs here; [3] PIT-ADJ schedule provides 'bookkeeping' adjustments when you are eligible for capital gains, certain credits and other adjustments; [4] PIT-ES is the form for estimated income tax if you are self-employed. You can find the forms, instructions and rate tables on our web site at www.state.nm.us/tax. [source: http://www.tax.state.nm.us/pubs/PITnonresidentsbrochure.pdf] If your income in New Mexico is not over $4,000, the rate is equal to 1.7% of taxable income [source: http://www.tax.state.nm.us/pubs/newres.htm] If your Arizona adjusted gross income is at least [Single] $ 5,500 or $15,000 [for Married filing jointly] then you must file an Arizona state tax return. [source: http://www.revenue.state.az.us/forms/2005/instructions/140NR%20instructions_sv.pdf ] A nonresident is required to file a Colorado income tax return if he/she is required to file a federal income tax return, and had Colorado-source taxable income. A part-year resident or nonresident of Colorado will complete the Colorado individual income tax return, Form 104, and the 104PN part-year resident/nonresident tax calculation schedule. [source: http://www.revenue.state.co.us/fyi/pdf/income06.pdf ] Tax forms are available at http://www.revenue.state.co.us/TPS_Dir/wrap.asp?incl=forms_download Every non or part-year resident having income from Utah sources who is required to file a federal return must also file a return for the state of Utah. Tax forms are available at http://www.tax.utah.gov/forms/current.html . On 3-26 Energy Transfer Partners announced a quarterly distribution of $0.7875/unit [compared to .76875 in Q1] to be paid on April 13th to Unitholders of April 6, 2007. On 3-02 Sanders Morris Harris Downgraded XTEX from Buy to Hold and RBC Capital Mkts Downgraded XTXI from Outperform to Sector Perform. On 3-12 UBS Initiated coverage of BWP at Neutral. On 3-14 Goldman Sachs Downgraded HEP from Buy to Neutral. On 3-20 RBC Capital Mkts Downgraded MMLP from Outperform to Sector Perform. On 3-21 Citigroup Downgraded RGNC and DPM from Buy to Hold. While DPM was downgraded on valuation, the brokerage said it cut Regency as it expects lower near-term distribution growth for the company due to a less favorable gas processing environment. Citi said it was lowering its price target by $1 to $27.50 per unit on Regency Energy. But Citi raised its target to $39.50 per unit from $37.50 on DCP, following the company's move to acquire certain natural gas gathering and compression assets in Oklahoma from Anadarko Petroleum. On 3-28 Lehman Brothers Initiated coverage of DEP at Equal-weight, while on 3-14 AG Edwards Initiated coverage at Hold, and on 3-12 Wachovia Initiated coverage at Outperform, UBS Initiated at Neutral and Citigroup Initiated at Buy. On 2-01 Citigroup Upgraded VEH from Hold to Buy. On 2-01 Credit Suisse Initiated coverage of APL at Neutral. On 2-01 Wachovia Downgraded APL from Outperform to Market Perform. On 2-02 Citigroup Downgraded BWP from Buy to Hold. On 2-06 AG Edwards Downgraded APL from Buy to Hold, Downgraded MWE from Buy to Hold, and Downgraded XTEX from Buy to Hold. On 2-14 RBC Capital Markets reiterated its Outperform rating on BWP. On 2-16 Stifel Nicolaus Initiated WPZ at Buy, RBC Capital Markets Initiated WPZ at Top Pick, RBC Capital Markets Initiated BPL at Underperform, and Citigroup Downgraded TGP from Buy to Hold. On 2-23 Credit Suisse Downgraded HEP from Neutral to Underperform. On 2-27 AG Edwards Downgraded TGP from Buy to Hold. The CAGR estimates were influenced by those attained from Yahoo, but are primarily based on those from AG Edwards. The DCF estimates for ATN, BBEP, EVEP and LINE are from AG Edwards. Those for CEP and LGCY are based on their current distributions, where I used dcf/.9 = distribution [which is approx the sector average] to arrive at a DCF. And the EVEP 2008 EPS estimate was also absent at Yahoo - so I used the current trend to estimate that. This whole sector is brand new, with ONLY LINE having paid a distribution in 2006. And the abscence of a track record causes the CAGR estimates to be varied and undependable. And normally I would not even cover MLPs withoutfirst having DCFs. But the unit price gains in this sector have been too high to ignore. The P/E ratios still look very attractive relative to standard MLPs. And many of the CAGR estimates [estimate that are so high that I am not using them for my metrics] for most E&P's are significantly higher than most regular MLPs. At the moment, I still have a problem believing the CAGRs would be higher for sustainable periods. E&P's can purchase assets at lower enterprise values to EBITDA ratios and thus make more accretive acquisitions compared to midstream MLPs, where the purchase of these acquistions by traditional MLPs now come with higher price tags and lower accretion. I would suspect that over time, the EBITDA multiples for E&P assets will grow too. Because of the hyper-accretiveness of new acquisitions, those E&P MLPs with the newest and the highest percentage of acquisitions will be the ones that will probably have the highest unit price appreciation. Thus the Forecaster Model - which uses valuation and CAGR differences to mathamatically find MLPs that are undervalued - would logically be less predictive in this sub-sector. Linn Energy Announces 2006 Results Prime Newswire 3-29 For 2006 LINE's [1] proved reserves increased 135% to 454.1 Bcfe from 193.2 Bcfe [2] Total production increased 124% to 10.8 Bcfe from 4.8 Bcfe and [3] Adjusted EBITDA increased 246% to $75.1 million from $21.7 million. Ratings Update: On 3-6 RBC Capital Mkts Downgraded BBEP from Outperform to Sector Perform. On 3-16 AG Edwards Downgraded BBEP from Buy to Hold. On 3-21 Friedman Billings is reiterated Legacy (LGCY) as a buy and is raising the price target to $29 from $27 dollars. On 2-8 Wachovia Initiated coverage of ATN at Market Perform. On 2-01 KeyBanc Capital Mkts / McDonald Initiated coverage of ATN at Buy. A Brief Intro to this Sector: From Quantum Energy Partners presentation at the March MLP Conference Linn Energy, LLC [LINE]: IPO on 1/12/06. Assets in the Appalachian Basin. Structured as an LLC with no IDRs. EV Energy, L.P. [EVEP] IPO in Sept 2006. Asset base primarily in the Appalachian Basin and N. Louisiana. BreitBurn Energy Partners, L.P. [BBEP] IPO in Oct 2006. Asset base primarily Los Angeles Basin, Texas and Wyoming. Constellation Energy Partners, LLC [CEP] IPO Nov 2006. Asset base of CMB in Black Warrior Basin. IDRs up to 15%. Atlas Energy Resources, LLC [ATN] IPO Dec 2006. Asset base primarily Appalachian Basin. IDRs up to 25%. Legacy Reserves, L.P. [LGCY] IPO Jan 2007. Asset base primarily Permian Basin and SE New Mexico. No sub units or IDRs. Current market capitalization of the six E&P MLPs is approx $4.5 billion. Total market capitalization of publicly traded MLPs is greater than $100 billion. Quantum Energy Partners estimates that the pool of assets that are candidates for E&P MLP ownership is approx $270 billion in North America which are proved, developed and producing assets, many which technically qualify for MLP treatment. What is the incentive to E&P management teams to place these assets into the MLP vehicle? Publicly traded E&P companies (CCorps) are currently valued for 4-5x EV/EBITDA vs. 9-12x EV/EBITDA multiples for publicly traded E&P MLPs. BreitBurn Energy Partners was founded 20 years ago by Hal Washburn and Randy Breitenbach. Reserves/production = 18 years. The average US Royalty Trust R/P = 9.8 years and Canadian Oil and Gas Trust = 7.8 years. Average payout ratio for BBEP = 76% compared to 86% for US Royalty Trust and 78% for Canadian Oil & Gas Trusts. Provident [of Canada] owns two thirds of MLPs - one third owned by public unitholders. Cost of capital advantage over C-corps and no IDRs. Zero debt at IPO. Provident is an innavative trust - first to acquire assets in US. First to build midstream assets. Being aligned with Provident gives us access to more deals - larger deals which Provident will co-own. 30 million of crude reserves held back from IPO and avalable for drop down - thus able to double BreitBurn just from drop downs. Over the last four years BBET has grown daily production by 21% annually, reserves by 14% annually, and grown the 'standard measure' by 35% annually. California 54% [Santa Fe Springs, Rosecrans, Brea Olinda], Wyoming 40% [Black Mountain, Gebo, Hidden Dome, North Sunshine] and Texas 6% [Lazy JL] of production. Approximately 70% of 2007 production is hedged at $67.58 and 60% of 2008 production hedged at $63.69. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||