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The website explains how distributable cash flow (DCF) is defined and why it is important to analyze it and derive a sustainable measure of DCF. Results reported by master limited partnerships (MLPs) are analyzed. comparisons of reported DCF to sustainable DCF are generated, and various coverage ratios and reports analyzing performance are generated. Simplified sources and uses of funds statements are presented to focus readers' attention on key cash flow items. The website also features general articles about MLPs and about other topics of interest to yield-focused investors.

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The documents and opinions in this website are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the securities mentioned or to solicit transactions or clients. The information in this website is believed, but not guaranteed, to be accurate. All content on this website is presented as of the date published, is not updated and may be superseded by subsequent market events or for other reasons Under no circumstances should a person act upon the information contained within without first conducting his/her own independent research and consulting with his/her investment advisor and tax professional as to whether such action is suitable based on the investor’s investment objectives, personal and financial situation, and specific legal or tax situation.

BPL - What to look for in Buckeye Partners' results for 2Q 2017

 

 

 

 

Author: Ron Hiram

Published: July 24, 2017

Summary:

  • Operating income declined in 1Q17 vs. 1Q16, despite the boost given by the first contribution from VTTI. It is important to see whether this recurs in 2Q17.
  • Per unit, DCF growth has outpaced distributions in 6 of the past 9 quarters, but not in the recent two. It is important to see whether this recurs in 2Q17.
  • Coverage ratios based on reported DCF improved markedly in the latest quarter and TTM period; sustainable DCF in that period also improved, but coverage remained under 1x.
  • BPL used debt and equity to fund $85 million of its distributions in the TTM ended 3/31/17; will this recur for the TTM ending 6/30/17, and to what extent? Continue reading BPL – What to look for in Buckeye Partners’ results for 2Q 2017

MMP - What to look for in Magellan Midstream Partners' results for 2Q17

 

 

 

Author: Ron Hiram

Published: July 24, 2017

Summary:

  • The 19% increase in 1Q17 operating margin vs. 1Q16 primarily reflects the impact of mark-to-market gains on futures contracts in the recent quarter vs. losses in the prior year’s quarter.
  • Overall, despite the high level of product margin in 1Q17, MMP’s reliance on commodity-related activities has been diminishing when measured on a trailing twelve months basis.
  • Look not only to what extent operating income increases in 2Q17, but also how much of that increase is driven by commodity-related activities.
  • 2Q17 results will also indicate whether distribution growth continues to outpace DCF growth, as was the case in 7 of the last 9 quarters, leading to lower coverage ratios.
  • Excess cash generated declined in the TTM periods ending 3/31/17, 12/31/16, 9/30/16, 6/30/16 and 3/31/16. Look to see whether this trend continues for the TTM ending 6/30/17.

Continue reading MMP – What to look for in Magellan Midstream Partners’ results for 2Q17

ETP - Closer Look at Energy Transfer Partners' results for 4Q 2016

 

Author: Ron Hiram

Published: March 10, 2017

Summary:

  • Despite spending ~$14.6 billion (net of dispositions) in the two-year period ended 12/31/16 (~$15.6 billion in the two year period ended 12/31/15), results have been dismal.
  • Per unit Adjusted EBITDA in 2016 is roughly the same as it was in 2012; DCF per unit in 2016 was below its level in 2013.
  • ETP has been funding distributions by issuing debt and limited partnership units, by selling assets sales, and by reducing cash reserves.
  • Synergies from the merger are likely to be modest; leverage for the combined entity will remain high, as will cost of capital because the IDRs will still be in place.
  • For many years I held positions in both ETP and ETE (significantly overweighed to the latter), but I lost confidence in management and no longer hold the units. Continue reading ETP – Closer Look at Energy Transfer Partners’ results for 4Q 2016

BPL - A Closer Look at Buckeye Pipeline Partners' 4Q16 results

 

Author: Ron Hiram

Published: March 6, 2017

Summary:

  • BPL has substantially underperformed the Alerian MLP index since announcing the VTTI transaction, possibly due to concerns regarding this deal.
  • DCF outgrew distributions per unit in 8 of the past 9 quarters; but in 4Q16 DCF per unit decreased due to the VTTI transaction. Special items impacted 4Q16 results.
  • In the TTM period ending 12/31/16 BPL funded a small portion its distributions (~$53 million) by issuing debt and limited partnership units.
  • Coverage ratios based on reported DCF improved markedly and were above 1x in 2016; coverage based on sustainable DCF in that period was just under 1x
  • Distributions are unlikely to increase in 2017, but financial metrics will likely improve; the leverage ratio should come down coverage ratios should improve modestly.

Continue reading BPL – A Closer Look at Buckeye Pipeline Partners’ results for 4Q 2016

EPD - A Closer Look at Enterprise Products Partners' results for 4Q 2016

 

Author: Ron Hiram

Published: February 28, 2017

Summary:

  • Despite projects totaling ~$9 billion placed into service in the last three years, gross operating margins and Adjusted EBITDA per unit have been declining for eight consecutive quarters.
  • For the last two and a half years (since 2Q14), distribution growth has been outpacing DCF growth on a per unit basis; consequently coverage ratios are declining.
  • Nonetheless, coverage remains solid and is one of the highest among midstream energy MLPs.
  • Projects being placed into service and a more favorable business environment are expected to reverse some of the unfavorable trends.

Continue reading EPD – A Closer Look at Enterprise Products Partners’ results for 4Q 2016