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Changes in the 2008 Update: Planned changes for MLPs, I will be adding EPB, KGS, SEP, SGLP and TOO - and CLMT and CQP will also be added if I can get DCFs before March. For E&Ps, I plan on adding ENP, QELP and VNR. For CEFs, I plan on adding MTP and SRV. I intentionally do not plan on adding BGR because there are no MLPs in its top five holdings. For GPs, I will add the non-midstream GPs AHGP, NRGP, and PVG mainly because I want more GP data, but also because those three have been great investments. I plan on tracking short sales ratios this year just to see if that data is predictive. I plan to further obscure [instead of lightly obscure] the sources of my DCF estimates in 2008 so that those who are my sources will be protected and benefit from that extra knowledge of knowing the sources of their information. I expect to update the site only twice a week instead of four times a week. More frequent updates did not dramatically change the valuations in 2007. And my increased affluence from years of mostly successful investing has given me a degree of increased confidence that women are finding attractive, causing a more active social calendar. These are not the final numbers for 2007 - there is a small amount of data yet to be input. 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. 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 has been a useful tool for timing of MLP purchases - buy MLPs when the spread is high. The CEF spread is used in academia to measure investor sentiment. Buy MLPs when the price is at the largest discount to NAV.
To see a spreadsheet showing the forecasted 2006 returns and the 2006 actual returns, click here. Crosstex Announces Public Offering Business Wire 12-13 Crosstex Energy, L.P. announced that it has commenced a public offering of 1.8 million common units. XTEX expects to use the net proceeds of the offering to repay outstanding borrowings under its $1.185 billion credit facility. Crosstex Energy (XTXI) owns a 37% limited partner interest. After the offering, XTXI will own an approximate 36% limited partner interest and it could be reduced to approximately 35% if the underwriters exercise their option to purchase additional common units in full. MarkWest Announces $50 Million Expansion in East Texas Business Wire 12-12 MarkWest announced details regarding its plan to invest approximately $50 million to expand its gathering and processing presence in East Texas. MarkWest owns and operates the East Texas gathering system and the Carthage gas processing plant in Panola County, Texas, one of the most prolific gas producing counties in the United States. MarkWest currently gathers approximately 420 million cubic feet per day (MMcf/d) of natural gas in the East Texas system, an increase of nearly 70% since MarkWest acquired the gathering assets in 2003 [it is the increase in volumes that makes this item news worthy.]. Of the 420 MMcf/d of natural gas currently gathered by MarkWest, 180 MMcf/d is processed in the Carthage plant. MarkWest's gathering and processing volumes in East Texas continue to demonstrate strong growth. In addition, MarkWest recently executed new long-term agreements that will add significant new gas volumes. To accommodate this growth, MarkWest will invest approximately $28 million to expand the existing gathering system, and will invest approximately $21 million to expand the processing capacity at its Carthage facility from 200 MMcf/d to 280 MMcf/d. MarkWest expects the gathering expansions will be completed throughout 2008, and the processing expansion is expected to come on line in the first quarter of 2009. ETP Announces Guidance & Common Units Offering Business Wire 12-11 Energy Transfer Partners announced that it has launched a public offering of 5,000,000 common units representing limited partner interests, with an over-allotment option of 750,000 common units. Net proceeds from the offering will be used by ETP to repay borrowings outstanding under its $310 million, 364-day term loan credit facility. ETP fell 2% in slightly heavy volumne after the announcement. On 12-12 ETP prices the offering at $48.81 per common unit. ETP expects EBITDA for the twelve month period ending December 31, 2008 to total $1.25 billion and EBITDA for the twelve month period ending December 31, 2009 to total $1.55 billion to $1.65 billion. For the four month period ending December 31, 2007, the Partnership now expects EBITDA to total $370 million. ETP also updated its capital expenditure guidance for the 28 month period ending December 31, 2009. In the four month period ending December 31, 2007, growth capital expenditures are expected to total $790 million. In 2008 and 2009, growth capital expenditures are expected to total in aggregate $2.1 billion, with $1.8 billion expected in 2008 and the remainder in 2009. The increase in both EBITDA and growth capital expenditures in the 28 month period ending December 31, 2009 reflects a stronger outlook and expansion of ETP's intrastate and interstate business units. Maintenance capital expenditures in 2008 and 2009 are expected to total $105 million annually. Regency LP to Acquire CDM for $655M AP 12-12 Regency Energy Partners LP has agreed to purchase CDM Resource Management Ltd., a natural gas compression services company, for $655 million. Houston-based CDM operates about 540,000 horsepower of field compression in Texas, Louisiana and Arkansas. Once the deal closes, Regency will operate more than 700,000 horsepower of compression. RGNC expects the acquisition to immediately add to cash flow. Regency will fund the transaction with $446 million of debt; $205 million of deferred-pay shares issued to the owners of CDM; and a $4 million contribution from its general partner. The new Class D shares will be issued at a 7.5 percent discount to the common share price, and will not participate in four distribution periods following the deal's close. They will thereafter be converted to common stock on a one-for-one basis. HLND Announces Guidance for 2008 PRNewswire 12-05 Hiland Partners announced fiscal year 2008 guidance of $75-$83 million for EBITDA and $5-$6 million for Maintenance Capital Expenditures. "Our EBITDA guidance, which reflects an increase of approximately 53 to 69 percent over our trailing twelve month EBITDA of $49 million, is a conservative estimate of our expectations for our existing assets and does not include any contributions from potential organic growth opportunities that are currently under consideration," stated CEO Joe Griffin. "Furthermore, based on the current outlook for drilling activity along our systems and the gathering, processing and treating capacity established during 2007, I expect the Partnership to have ample opportunity to exceed these estimates." GEL Prices Offering PRNewswire 12-04 Genesis Energy, L.P. announced that it has priced its offering of 8,000,000 common units at a price to the public of $22.00 per unit. Genesis will use the net proceeds from this offering for general partnership purposes, which may include, among other things, temporarily repaying a portion of the indebtedness under its credit facility and, ultimately, funding a portion of its future growth expenditures. WPZ Prices Offering PRNewswire 12-05 Williams Partners L.P. priced its previously announced offering of its common units at $37.75 per unit. The offering of 9.25 million common units is expected to close on Dec. 11. Williams Partners plans to use the net proceeds from the offering to fund a portion of the $750 million purchase price of Williams Partners' previously announced acquisition of certain membership interests in Wamsutter LLC from Williams [WMB]. EROC Becoming Hybrid Midstream / E&P MLP Various For Q3-07, EROC's Segment Gross Profit contributions were 65% from our Midstream Business, 27% from our Upstream Segment and 8% from our Minerals Segment. EROC stated in its November presentation for RBC that it is headed towards getting to only 50% of EBITDA from midstream assets. EROC IPOed as a pure midstream MLP. But it has made 2007 acquisitions in upstream and mineral interests from companies like Escambia Asset Co. LLC and Redman Energy. EROC's chairman and chief executive office, Joseph A. Mills, came to EROC from a mineral company when EROC purchased his company earilier in 2007. MWE Announces $90 Million Private Placement Business Wire 12-18 MarkWest Energy Partners announced today that it entered into and closed a definitive agreement for the private placement of approximately 2.9 million newly issued common units at a purchase price of $31.50 [MWE closed on 12-17 at $32.26], for gross proceeds of approximately $90 million, not including the GP's contribution to maintain its 2% general partner interest. The proceeds will be used for general corporate purposes, including working capital, and to fund capital expenditures. Magnetar Capital acted as the lead investor in the private placement. Other investors in the private placement included funds managed by Kayne Anderson Capital Advisors, Tortoise Capital Advisors, and Hartz Capital Investments. Jones to Retire at BWP Business Wire 12-18 Boardwalk announced several changes as part of the organizational realignment that was begun early this year, including the consolidation of senior management in Houston. President H. Dean Jones II announced his retirement effective March 1, 2008. Chief Executive Officer Rolf A. Gafvert and Chairman of the Board Arthur L. Rebell praised Jones for his 27 years with Texas Gas and his critical role in helping shape Boardwalk into what it is today. Two Analysts Express Optimism about El Paso Pipeline AP 12-26 Shares of El Paso Pipeline Partners LP surged to a new high for the third straight trading session on 12-26 after two analysts issued upbeat outlooks on the recently public natural gas pipeline operator. Optimistic projections by two separate analysts helped propel the shares. Goldman Sachs analyst David Chiaro began coverage of the company with a "Buy" rating and a 12-month target price of $28. Chiaro said he believes investors are underestimating the company's chances of acquiring additional pipelines from general partner El Paso Corp., which created El Paso Pipeline to operate transmission networks and floated the new company's shares last month. The analyst expects El Paso Pipeline will spend $2.75 billion on acquisitions over the next three years, boosting earnings before adjustments by $305 million. El Paso Corp. has an extensive slate of cash flow-stable, long-distance natural gas pipeline assets, a portion of which we expect to be offered to" El Paso Pipeline, Chiaro said in a note to investors. "Also, we expect El Paso to utilize El Paso Pipeline as its vehicle to make further investments into energy infrastructure, providing another growth alternative." Wachovia analyst Michael Blum is also bullish on the company. In a separate note, he rated the stock "Outperform" and valued its shares at $26 to $28 apiece. Blum said the company is a "high-quality master limited partnership with predominantly fee-based cash flow, a visible growth profile, and a strong sponsor." He also noted the potential for growth through El Paso Corp. or outside acquisitions, and cited El Paso Pipeline's "high quality assets in premier markets" such as Colorado, Texas and the Southeast. Getting More from Barnett Shale Jim Fuquay, Fort Worth Star-Telegram 12-02 Spend a few million bucks putting together a lease, drilling a well and coaxing it to give up some of the natural gas locked up in the Barnett Shale, and what do you get? Maybe 20 percent to 30 percent of the gas that's there. Not good enough, producers say. They're developing new techniques and technologies to boost that to 50% or more. Horizontal drilling -- turning a steel drill pipe 90 degrees from vertical to horizontal -- is what made the shale happen. But that's yesterday's news. Today, producers are making horizontal runs, called laterals, up to twice the industry's more typical 3,000 feet. They are also making more fractures along those laterals and fracturing two adjacent wells at the same time in an effort to crack the hard shale like a windshield after a North Texas hailstorm. They are squeezing in an extra well bore between two existing wells, boosting recovery while using the existing drilling site, an increasingly scarce commodity as drilling moves into urban areas. Those incremental improvements promise to roughly double the volume of gas recovered from the huge field that underlies much of a dozen North Texas counties. Fort Worth-based XTO Energy offers the example of a 640-acre section -- a square mile -- which in the shale the company calculates holds about 150 billion cubic feet of natural gas. The company figures that if it drilled eight wells on that land, or 80 acres per well, each well would recover 3 billion to 3.5 billion cubic feet of gas, which at today's prices and drilling costs would be handsomely profitable. At 80 acres per well and average lateral lengths, XTO would space those laterals 1,320 feet apart. But the company figures that if it doubled the number of wells by cutting that spacing in half, or 660 feet, it could capture 13% more of the gas. At this 40-acre spacing, each additional well wouldn't be as profitable as the first eight wells, but at the right price and costs, they would still make money. Sixteen more wells at a 330-foot spacing could boost recovery by 19%, XTO calculates. That would push total gas produced to 51% of the original reserves. Again, at 20-acre spacing each well wouldn't produce as much gas as before, but if the economics worked, the gas could be had. And it's not just something for the future. Devon Energy has a pilot project with 20-acre spacing in Denton County. If tighter spacing is the equivalent of a football team marching slowly but methodically down the field, drilling longer laterals might be the equivalent of throwing the long bomb. It might pay off, but it might blow up, too. "We've got a couple of laterals over a mile long. They were extremely expensive to drill," said Mark Whitley, senior vice president at Range Resources. "The farther out you drill, if you have a mistake, it's likely to be train wreck," he said. For example, if a drill bit or a piece of pipe broke at that distance, it would be difficult, at best, and perhaps impossible to retrieve. If drilling sites are at a premium, however, going long might be a necessary risk. Fort Worth Energy, which has teamed with XTO to lease several neighborhoods just south of downtown Fort Worth, has said it expects to drill as far as 6,000 feet to reach its leases. Fort Worth Energy won many of those leases because it agreed to put its drill sites far from those neighborhoods, but the trade-off is the longer laterals. Yet another option is to make more fractures along each lateral. Fracturing works by punching holes in the well bore at several points, then injecting water and sand into those points, or stages, one at a time. At somewhere around 4,000 pounds per square inch, the pressure begins to shatter the shale. Gaps, perhaps an eighth-inch to a quarter-inch wide, open and extend hundreds of feet from the well bore. When the pressure is released, the water flows back to the well, but the sand remains in place, propping the fracture open enough to let the gas slowly escape. Fracturing has been used in the oil field for decades. But as operators gain experience in the shale, they are learning the best places to locate those fractures. Finally, some operators fracture two adjacent wells simultaneously. The goal is to expose the shale to more pressure and produce a more complex web of fractures. Range has even done three wells simultaneously in Hood and Tarrant counties. How do you get your money's worth after paying $180 million just for the right to drill at Dallas/Fort Worth Airport? You drill it all. Chesapeake Energy's development plan for D/FW stitches more than 300 wells from dozens of drilling sites to reach just about every foot of its 18,000-plus acres. Thanks to instruments that guide and track the drill bit's path, the company expects to reproduce this precision "quilted" pattern in real life. On 12-04 Wachovia Initiated coverage of SXL at Market Perform. On 12-12 SMH Capital Initiated coverage of SGLP at Buy and Initiated coverage of NGLS at Buy. 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