Thursday, June 19, 2014

Pipeline: The Need For Speed -- June 19, 2014

I've posted this video so many times (the one down below), it's getting "old" for some of you, but I never tire of it. But today there's a reason for posting it.

I track "The Big Stories" here. Under "US Energy Revolution," I have a link to "Pipelines." When I started the blog on the Bakken, I knew the pipeline story had to be followed. Trying to figure out Enbridge and how the company was structured was one of my early posts. I believe Enbridge was the only non-oil-and-gas-exploration-and-production company that I listed among the operators. At the time I don't think I even knew who was building the Keystone XL pipeline. But over the course of blogging about the Bakken, I've followed a couple of pipeline companies, notably Williams Cos and Enbridge. Williams was never particularly exciting, just one of the players. Enbridge was exciting initially but then seemed to just sort of plateau.

Then earlier this week, WMB jumped as much as 24% in share price: in all my years of investing I had never seen that. I posted links to the story. I still don't understand it all but over time it will make sense. Surprisingly, WMB has pretty much held its initial gains.

Then, today, out of the blue, I noted a short note over at Yahoo!In-Play while reading the news on my wife's iPad before getting out of bed:
Enbridge Energy and Enbridge announce equity restructuring: Enbridge Energy Partners and Enbridge  announced an agreement to undertake a restructuring of the Partnership's equity under which its general partner will permanently waive its existing incentive distribution rights in exchange for Class D units and new incentive distribution units. This restructuring will decrease the general partner's share of incremental cash distributions from 48% of all distributions in excess of $0.495 per unit per quarter down to 23% of all distributions in excess of the Partnership's current quarterly distribution of $0.5435 per unit per quarter. As a result, the share of incremental cash available for distribution to holders of Class A common units will increase correspondingly. 
That announcement was released at 1:02 a.m. EDT. I didn't understand it the verbiage, but I did understand the last line:
As a result, the share of incremental cash available for distribution to holders of Class A common units will increase correspondingly. 
EEP already paid 7%. EEP surged 15% at the opening, and came close to holding that gain at the end of the day. I thought a 7% distribution was nice, but what's coming?

Later in the morning, there was more:
Enbridge Energy announces drop down of additional interests in its natural gas business to Midcoast Energy Partners: Midcoast Energy Partners (MEP) announced that it has agreed to acquire from its affiliate Enbridge Energy Partners a 12.6% limited partner interest in Midcoast Operating for $350 mln in cash, which will bring the Partnership's total ownership interest in Midcoast Operating to 51.6%. This transaction is expected to close on or about July 1, 2014 and represents the Partnership's first acquisition of additional interests in Midcoast Operating since its initial public offering on November 13, 2013.
Another pipeline story today involved Targa. Bloomberg is reporting:
Targa Resources Corp. rose 20 percent in the final minutes of trading today, while Targa Resources Partners gained 18 percent. Energy Transfer Equity slipped to $53.72 a share, giving the company a market value of about $29 billion.
If an agreement is eventually reached, the purchase would be the largest ever orchestrated by Warren, who expanded Dallas-based Energy Transfer through a $13 billion buying spree in 2010 and 2011, according to data compiled by Bloomberg.
The U.S. shale-fracking boom is increasing fuel supplies and propelling deals among the companies that transport oil and natural gas.
Disclaimer: this is not an investment site. Do not make any investment decisions based on what hyou read here or what you think you may have read here.

Pipeline, Stevie Ray Vaughn and Dick Dale

There are several story lines and several reasons I can think of why there is this interest in pipelines all of a sudden but I would probably only embarrass myself if I listed them so I will hold off for now. Maybe later if I remember. 

Motley Fool asked the question: "why did EEP and EEQ pop today?" This was the answer:
One of the goals here is to increase liquidity to fund a multi-billion dollar liquids pipeline at Enbridge Partners while still holding an economic interest in the mid-stream natural gas business. Incrementally the deal will add liquidity, but the bigger driver of value long-term comes from a pipeline replacement plan that could cost $7.5 billion. At the end of the day, I don't think this fundamentally changes the investment thesis in any of these three companies, it just shifts assets around -- something oil and gas companies are doing a lot of these days.
Did that answer your question? No, I didn't think so. Talk about poor analysis. So, if "at the end of the day," it doesn't mean anything, why did EEP jump 14% and EEQ jump 12%? Enquiring minds want to know.


On another note, my thoughts on the Mideast:
Of all the stories out there right now, I'm really curious how Kurdistan will play out. The tea leaves suggest Kurdistan could take this as their best opportunity yet to separate from Baghdad completely. They won't get US support (but Obama has flip-flopped so much they probably don't pay much attention to hm any more anyway) but they might get Turkish help. Turkey is probably now more concerned about ISIS than the Kurds. Turkey has always had an Islamist problem and it's gotten worse since I retired from the USAF. I think Turkey has a bigger risk of insurgency than Saudi Arabia.

I was just ready to sign off and then this popped up over at Seeking Alpha:

  • Sempra Energy’s planned Cameron LNG project to export liquefied natural gas from Louisiana wins final FERC approval, becoming the second such facility to win the agency’s backing.
  • The agency votes unanimously to let Cameron LNG move forward after completing an environmental review; the project also has been approved by the U.S. Energy Department.
  • Cheniere Energy's Sabine Pass export plant, now under construction in Louisiana, is the only other facility to win the support of both agencies.
I just talked about SRE yesterday.

For Investors Only

Trading at new 52-week highs: AA (Alcoa), AEP, APC, APA, BHI, BKH, BCEI, CHK, CSX, CVX, COP, CLR, EEP,  Flotek, Genesee & Wyoming, Greenbrier, HAL, HES, KOG, NRG, NFX, NSC, PSX, SRE. Whiting traded near its high.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you might have read here.

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