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Analyzing Cash Flows of Master Limited Partnerships

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BPL82.47  chart+0.12
BWP19.51  chart+0.26
EPB36.10  chart+0.28
EPD78.40  chart+0.82
ETP57.86  chart+0.54
KMP84.20  chart+0.67
MMP86.10  chart+0.99
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CEQP15.21  chart-0.09
RGP31.80  chart-0.08
PAA59.82  chart+0.30
SPH45.03  chart-0.18
WPZ53.59  chart+0.32
NLY11.30  chart+0.03
AGNC23.39  chart+0.15
2014-07-22 16:00

BPL - A Closer Look at Buckeye Partners' Distributable Cash Flow as of 1Q 2014

master limited partnership logos-BPL

Author: Ron Hiram

Published: May 26, 2014

Buckeye Partners L.P.  (BPL) recently reported its results of operations for 1Q 2014. This article analyses some of the key facts and trends revealed by this and prior BPL reports, evaluates the sustainability of BPL’s Distributable Cash Flow (“DCF”) and assesses whether BPL is financing its distributions via issuance of new units or debt. Continue reading BPL – A Closer Look at Buckeye Partners’ Distributable Cash Flow as of 1Q 2014

Model for assessing sustainability of AGNC‘s 11% dividend yield – 1Q14 update

REIT logos-AGNC

Author: Ron Hiram

Published: May 25, 2014

This article applies a methodology described in my prior articles to assess whether the dividends paid by American Capital Agency Corp. (AGNC) are sustainable in light of the latest available information (1Q14 data) on leverage and interest rate spreads. Continue reading AGNC – Model for assessing sustainability of AGNC‘s 11% dividend yield – 1Q14 update

WPZ - A Closer Look at Williams Partners’ Distributable Cash Flow as of 1Q 2014

master limited partnership logos-WPZ

Author: Ron Hiram

Published: May 20, 2014

Williams Partners, L.P. (WPZ) recently reported its results of operations for 1Q 2014. This article analyses some of the key facts and trends revealed by this and prior WPZ reports, evaluates the sustainability of WPZ’s Distributable Cash Flow (“DCF”) and assesses whether WPZ is financing its distributions via issuance of new units or debt. Continue reading WPZ – A Closer Look at Williams Partners’ Distributable Cash Flow as of 1Q 2014

NLY - Model for assessing sustainability of Annaly‘s dividend – 1Q14 update

REIT logos-NLY

Author: Ron Hiram

Published: May 18, 2014

This article applies a methodology described in my prior articles to assess whether the dividends paid by Annaly Capital Management, Inc. (NLY) are sustainable in light of the latest available information (1Q14 data) on leverage and interest rate spreads. Continue reading NLY – Model for assessing sustainability of Annaly‘s dividend – 1Q14 update

PAA - A Closer Look at Plains All American Pipeline’s Distributable Cash Flow as of 1Q 2014

master limited partnership logos-PAA Author: Ron Hiram

Published: May 16, 2014

Plains All American Pipeline L.P. (PAA) recently reported its results of operations for 1Q 2014. This article analyses some of the key facts and trends revealed by this and prior PAA reports, evaluates the sustainability of PAA’s Distributable Cash Flow (“DCF”) and assesses whether PAA is financing its distributions via issuance of new units or debt.

PAA transports, stores and markets crude oil and refined products; it also transports, processes, stores and markets natural gas liquids (“NGL”) and owns and operates natural gas storage facilities. PAA’s operations are managed through three operating segments:

  • Transportation Segment: fee-based activities associated with transporting crude oil and NGL on pipelines, gathering systems, trucks and barges;
  • Facilities Segment: fee-based activities associated with providing storage, terminal and throughput services for crude oil, refined products, natural gas and NGL, NGL fractionation and isomerization services and natural gas and condensate processing services; and
  • Supply & Logistics Segment: margin-based activities associated with sale of gathered and bulk-purchased crude oil, as well as sales of NGL volumes purchased from suppliers (including the sale of additional barrels exchanged through buy/sell arrangements entered into to supplement the margins of the gathered and bulk-purchased volumes).

Segment profits for recent quarters and the trailing twelve months (“TTM”) ended 3/31/14 and 3/31/13 is presented in Table 1 below. Segment profit is one of the key metrics used by management to evaluate performance of its business segments. It is defined as revenues plus equity earnings in unconsolidated entities less (i) purchases and related costs, (ii) field operating costs and (iii) segment general and administrative expenses. Each of the items above excludes depreciation and amortization.

Period:
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
TTM
TTM
3/31/143/31/13
Transportation206207198160164194184771711
Change vs. prior year26%7%8%-5%1%40%21%8%22%
Facilities154170146149150138140619542
Change vs. prior year3%23%4%31%67%39%47%14%46%
SupplyÊ& Logistics249149641764342091426381,059
Change vs. prior year-43%-29%-55%-36%239%14%-21%-40%65%
Total segment profit6095264084857485414662,0282,312
Change vs. prior year-19%-3%-12%-13%97%29%9%-12%45%

Table 1: Segment Profit, excluding “Selected Items Impacting Profitability”; figures in $ Millions (except % change)

Unlike the Facilities and Transportation segments that are predominantly fee-based businesses, a substantial portion of Supply & Logistics is margin based and hence results are more volatile. In a prior article I noted the drivers behind the extraordinary performance generated by this segment in 1Q13. Management rightly predicted infrastructure additions would relieve certain of the transportation constraints that had previously created extremely favorable crude oil margins benefiting Supply & Logistics. Therefore, the 43% decline in that segment’s profits in 1Q14 vs. 1Q13 (40% decline in the TTM ended 3/31/14 vs. the corresponding prior year period) does not raise a red flag. As previously noted, 1Q14 was expected to show a significant decline vs. 1Q13. Continue reading PAA – A Closer Look at Plains All American Pipeline’s Distributable Cash Flow as of 1Q 2014