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Daniel Long
Robert and Igor,
I received a message from Fidelity Brokerage about electing an all cash distribution of about $43 for my Williams shares, or cash + shares of ETC (Energy Transfer Corp – the new merged company?), or all shares of ETC. What is your best recommendation? What about ETE shares – will they become ETC shares automatically at the value of the merged companies?
Thanks.
DAL
Igor Greenwald
You should opt for cash as the value of ETC shares has been dramatically devalued since the deal was struck. You would only get $8 in cash if the merger went through regardless, but that’s much more than the share compensation currently on offer. Of course the deal terms could still change by mutual agreement or as a result of a court ruling, and the merger may not be completed. If it is, ETE units will not convert to ETC shares, and are likely to trade at a premium to ETC.
The status of TERP? Dividend @9%,yet the DCF is below 1x. Are they going to pull a KMI arrangement?
Igor Greenwald
I’m not sure where you’re getting your DCF number from, but if they were paying their prior dividend right now (as they will once the accounting is sorted out) they’d be covering it fully, I believe. Nothing has materially changed since this update a month ago: http://www.investingdaily.com/energy-strategist/articles/25350/dont-pity-the-orphans/
To which level would the price of natgas have to rise in order to make coal attractive to utilities again? Is this likely to happen?
Robert Rapier
Peter, probably above $3 there will be noticeable switching. It will happen to some degree, but over time it will happen less and less as environmental restrictions against coal continue to bite.
I understood that you´re bullish on oil prices in the long term. However, do you believe that there might be a temporary dip below 20 as forecast in this bloomberg article:
How much merit do the points made in this article have in your view and to what extent would such a drop in the price of oil affect companies providing mainly natgas infrastructure like ETE and WMB?
Robert Rapier
I saw that article. The guy had a much stronger case the last time he made that argument; this time I think he is throwing a Hail Mary. If something happened and oil prices did dip to that level, he was the only one to predict it. It would get him a lot of attention, so he is probably looking at it that way. If that never happens — and I put the odds at about 95% that it doesn’t happen — then he just plays it off and says that conditions changed. It is true that global inventories are still quite high, but U.S. production is now seriously declining and demand is still growing rapidly.
If prices did fall, it’s a rare second chance to jump in for those who missed out back in February. I just don’t think we are going to be afforded a second chance.
Stock Talk
Daniel Long
Robert and Igor,
I received a message from Fidelity Brokerage about electing an all cash distribution of about $43 for my Williams shares, or cash + shares of ETC (Energy Transfer Corp – the new merged company?), or all shares of ETC. What is your best recommendation? What about ETE shares – will they become ETC shares automatically at the value of the merged companies?
Thanks.
DAL
Igor Greenwald
You should opt for cash as the value of ETC shares has been dramatically devalued since the deal was struck. You would only get $8 in cash if the merger went through regardless, but that’s much more than the share compensation currently on offer. Of course the deal terms could still change by mutual agreement or as a result of a court ruling, and the merger may not be completed. If it is, ETE units will not convert to ETC shares, and are likely to trade at a premium to ETC.
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Richard Frederick
The status of TERP? Dividend @9%,yet the DCF is below 1x. Are they going to pull a KMI arrangement?
Igor Greenwald
I’m not sure where you’re getting your DCF number from, but if they were paying their prior dividend right now (as they will once the accounting is sorted out) they’d be covering it fully, I believe. Nothing has materially changed since this update a month ago: http://www.investingdaily.com/energy-strategist/articles/25350/dont-pity-the-orphans/
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Peter
To which level would the price of natgas have to rise in order to make coal attractive to utilities again? Is this likely to happen?
Robert Rapier
Peter, probably above $3 there will be noticeable switching. It will happen to some degree, but over time it will happen less and less as environmental restrictions against coal continue to bite.
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Peter
I understood that you´re bullish on oil prices in the long term. However, do you believe that there might be a temporary dip below 20 as forecast in this bloomberg article:
http://www.bloomberg.com/view/articles/2016-06-28/why-oil-is-still-headed-as-low-as-10-a-barrel
How much merit do the points made in this article have in your view and to what extent would such a drop in the price of oil affect companies providing mainly natgas infrastructure like ETE and WMB?
Robert Rapier
I saw that article. The guy had a much stronger case the last time he made that argument; this time I think he is throwing a Hail Mary. If something happened and oil prices did dip to that level, he was the only one to predict it. It would get him a lot of attention, so he is probably looking at it that way. If that never happens — and I put the odds at about 95% that it doesn’t happen — then he just plays it off and says that conditions changed. It is true that global inventories are still quite high, but U.S. production is now seriously declining and demand is still growing rapidly.
If prices did fall, it’s a rare second chance to jump in for those who missed out back in February. I just don’t think we are going to be afforded a second chance.
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