MASTER LIMITED PARTNERSHIPS

Tuesday, August 12, 2008

Big insider buy at Williams Partners (WPZ)..20,000 shares worth on the open market.
Also Legacy Partners (LGCY)...4000 shares. Insiders at MLPS are becoming more aggressive in their open market purchases. Atlas Pipeline had an 11,000 share insider purchase this morning and Buckeye Partners (BPL) late last week saw buying by insiders with both hands.

Means nothing of course but one never knows.

2 comments:

Anonymous said...: COPYRIGHT 2008 Hart Energy Publishing, LP.
The midstream's credit outlook is becoming increasingly negative,
despite high commodity prices and strong cash margins. Standard &
Poor's (S&P) explained its rationale for employing negative outlooks
on midstream companies in an industry report card.

S&P stated that large price increases associated with construction
projects are offsetting the larger-than-expected prices for natural
gas and crude oil. This in turn is raising the risk associated with
capital spending and lowering estimated returns on these projects.

Construction costs have been driven up by greater costs associated
with contractors, labor shortage and materials. S&P specifically cited
the large increase in the price of steel, which has risen from $530
per ton last year, to $1,100 this year. These higher prices also make
it more likely for construction overruns to result in a company's
credit rating or outlook being lowered.

S&P lowered the ratings for Boardwalk Pipeline Partners because of
higher costs associated with the company's pipeline projects. Pine
Prairie Energy Center also had its senior secured rating lowered
because of cost increases and construction delays.

The ratings firm also mentioned that companies with construction
projects in the Rockies will be closely evaluated because of the large
risks associated with the significant capital needed for projects in
this region. In addition, the dense population in the Rockies is
likely to result in more challenging and expensive rights-of-way the
report stated.

Despite this risk, many midstream companies, especially MLPs, are
using their windfall cash flow to repurchase stock or increase
dividends to holders. These financial risks are occurring as the
sector's overall leverage is increasing.

Negative ratings actions, which include outlook, CreditWatch and
ratings changes, have increased in their ratio to positive ratings
action from 2.0 in the second half of 2007, to 1.5 in the first half
of 2008.

In addition to increased capital spending and higher leverage, these
negative ratings are based on cost overruns and negative free cash flow.

Because companies are diverting incremental cash flow to their
shareholders/unitholders it is increasing their risk in the event of
overruns and cost increases in their projects.

The firm has yet to issue negative ratings strictly based on companies
diverting incremental cash flow to holders, but believes this approach
will not be sustainable or credit-neutral in the long-term unless
commodity prices remain high and free cash flow becomes less negative.
The report states that some companies will need to increase liquidity
and cash on hand in order to maintain their current ratings.

It would seem that hedging would be a good bet for companies in these
situations, but that may not be the case according to S&P., which
cited the case of Atlas Pipeline Partners. The company had its senior
unsecured rating lowered after it unwound 86% of its crude oil collars
that extend through 2009 at a cost of $250 million.

The company's crude hedges saw the company lose out on money because
of the huge price increases on crude and a weaker demand for ethane
and propane, which hurt the overall price of NGLs in comparison to crude; 8/12/2008 8:42 PM
Anonymous said...: joe
dreiser139 here
i concur with this article and in fact at present do not own any eandp mlps.
except for dmlp which has been shellacked recently and off course on the pipe side mwe.
thats it.
cost of exploring drilling etc very expensive plus to many eandp chasing to little resources.plus these resources getting expensive to buy.
mwe by far my largest holding.
tell boys not to get discouraged and just sit tight and take losses where appropriate redploy the monies.to crazy to trade in this market.
off course taking profits and sitting aint a bad idea either.
keep up the good work
ps big brown no wunderkind and certainly no secretariat guess his performaces steroid enhanced.
dreiser139; 8/13/2008 9:08 AM