adbrite ads

Your Ad Here
Your Ad Here




Friday, December 19, 2008


Well somebody was able to go to the well in the debt markets and price an offering as Energy Transfer Partenrs (ETP) priced 10 year senior notes at just under 10% and holders have rights which if exercised will force the company to buy back the notes at par in 2012. Kinder Morgan went to the well the day before. At least paper is beginning to move in here. Also we have Teekay Offshore Partners (TOO) telling us that business conditions are better than forecast and foresee no issues going into 2009. Same also goes for Teekay LNG Partners (TGP). Somebody is doing something right.

And we also have this brilliant downgrade from Morgan Keegan of Markwest (MWE) because they apparently see something in this chart that causes them to downgrade the stock to market perform.

Early post on this options expiration Friday with the dollar rallying this morning after getting ripped apart this week. The energy complex is a little weaker as oil cratered yesterday. Rates at record lows. And S&P cut their ratings on a dozen financials but stock futures remain above fair value so it continues to look like the market wants to rally. MLPS held up better yesterday than energy stocks as a whole so we may follow financials and the rest of the market.


Bruce said...

MWE is down 10% as a write this. Probably a result of the downgrade.
Yield is now about 30%. The market certainly must be discounting a dist. cut which is probably a pretty good bet.

Bruce (long MWE)

AggiePilot said...

Meant to post this earlier today but got busy outside since it warmed up to the mid 60's and was able to catch up on some yard work here in Texas. Anyway here is an anal note from M*.

"Kinder Morgan Energy Partners KMP is breaking through the frozen capital markets this week by raising $500 million in new debt and roughly $200 million in additional equity. The question on our minds is why Kinder is seeking to raise so much capital at relatively expensive rates: 9% for the 10-year senior notes and a cash yield of nearly 9% on the equity component. While Kinder's filing says the proceeds will be used to pay down outstanding borrowings on revolving credit lines and for general purposes, we wonder whether this is the full explanation. Kinder has a $250 million note maturing in February, but does not specifically need to raise cash to meet this obligation, in our view. We think Kinder is building a war chest to see it through potential tough times ahead.

In addition to Kinder, Enterprise Products Partners EPD, Enbridge Energy Partners EEP, Energy Transfer Partners ETP, and TC Pipelines TCLP have either come to market with debt issuances or filed registration statements for new debt or equity offerings in the past two weeks. These master limited partnerships have fee-based cash flows and attractive growth projects, but none of them, in our opinion, explicitly need to raise additional capital at historically high rates. From a liquidity standpoint, they could use capacity on existing bank lines for most or all of 2009 capital needs. So why raise cash at 9%-10%? We suspect that these companies fear capital markets could get worse before they get better. This thinking would suggest that those that can access markets, do. Those that can't, we suppose, hope markets get better soon. Taking advantage of the current, and perhaps evanescent, thawing in debt and now equity markets shows the best sort of opportunism, in our view."

I have been doing some buying the last 4 months, wish it had only been the last 2 months. Anyway looking to put some more into the market and keying in on the following listed in priority order, any comments would be appreciated. Think NG pipelines will come back with coming administration and overall low energy prices. Know some of these will lose some of their growth and less income with reduced gathering to a certain degree. But have some confidence in distributions, especially from those who can raise capital in current market.
KMP, ETP, BWP, TCLP, OKS and ETE which is probably poses some risk.