I just read an article suggesting that VNR will succumb to the same fate as LINE and BBEP. The author lays out in great detail why VNR will have to cut its distribution and will likely founder on the shoals of its enormous debt. Here's the link: http://seekingalpha.com/article/3732016 ... nts_header
Dan, since the view expressed in this article is quite at variance with reports published by you, I would appreciate your thoughts. Part, but by no means all, of the author's argument, is predicated on coming asset impairments. Although I can understand your argument for ignoring technical asset impairments, the author claims that the banks use this information to set the terms of their loans.
VNR: Can the company survive?
Re: VNR: Can the company survive?
Good time for you to learn how to use the tools on the EPG website. I can give you a fish or teach you how to fish.
1. Go to the website and log in.
2. Click on the MLP tab.
3. Find the forecast model for VNR, which I posted on 11/26.
4. Take a look at cash flow from operations on row 43. Is VNR generating more cash flow than their capital budget?
I don't know if VNR will cut or suspend their dividends, but they have more than enough cash flow from operations to service their debt and pay the dividends on their preferred shares.
Now download the forecast spreadsheet to Excel.
After you take time to study the Hedge Table at the bottom of the forecast model, see if you agree with the commodity prices that I'm using in my forecast for 2016. If you think they are too high you can change them on rows 52-54 and the forecast model "magically" adjust the earnings and cash flow shown above. All of the forecast models on the EPG website are marco driven.
1. Go to the website and log in.
2. Click on the MLP tab.
3. Find the forecast model for VNR, which I posted on 11/26.
4. Take a look at cash flow from operations on row 43. Is VNR generating more cash flow than their capital budget?
I don't know if VNR will cut or suspend their dividends, but they have more than enough cash flow from operations to service their debt and pay the dividends on their preferred shares.
Now download the forecast spreadsheet to Excel.
After you take time to study the Hedge Table at the bottom of the forecast model, see if you agree with the commodity prices that I'm using in my forecast for 2016. If you think they are too high you can change them on rows 52-54 and the forecast model "magically" adjust the earnings and cash flow shown above. All of the forecast models on the EPG website are marco driven.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: VNR: Can the company survive?
On November 9, VNR said this:
On November 6, 2015, we completed our semi-annual borrowing base redetermination and entered into the Fourth Amended and Restated Credit Agreement (“Restated Credit Agreement”), which reaffirms the Company’s $1.8 billion borrowing base. The terms of the Restated Credit Agreement also include, among other provisions, the increase in the maximum investments or capital contributions that can be made in certain entities from $5.0 million to $100.0 million. In addition, the Company is permitted to incur up to $300.0 million of junior lien indebtedness provided the borrowing base will be reduced by $0.25 cents for every dollar of junior debt issued.
As of today, November 9, 2015, there was $1.69 billion of outstanding borrowings and $105.5 million of borrowing capacity under the reserve-based credit facility, after consideration of a $4.5 million reduction in availability for letters of credit and a $1.8 billion borrowing base. We also have approximately $10.0 million in available cash.
On November 6, 2015, we completed our semi-annual borrowing base redetermination and entered into the Fourth Amended and Restated Credit Agreement (“Restated Credit Agreement”), which reaffirms the Company’s $1.8 billion borrowing base. The terms of the Restated Credit Agreement also include, among other provisions, the increase in the maximum investments or capital contributions that can be made in certain entities from $5.0 million to $100.0 million. In addition, the Company is permitted to incur up to $300.0 million of junior lien indebtedness provided the borrowing base will be reduced by $0.25 cents for every dollar of junior debt issued.
As of today, November 9, 2015, there was $1.69 billion of outstanding borrowings and $105.5 million of borrowing capacity under the reserve-based credit facility, after consideration of a $4.5 million reduction in availability for letters of credit and a $1.8 billion borrowing base. We also have approximately $10.0 million in available cash.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: VNR: Can the company survive?
Something you all should remember is that just because these upstream MLPs cut or suspend distributions to partners for awhile does not mean they are going bankrupt. Investors that picked up the beaten down MLPs in the last cycle made a killing. MLPs all know they have to make future distributions to win back Wall Street. Going into "hunker down" mode now to survive is exactly what the board's of these companies should be doing. Short term pain for long term gain.
Based on my forecast model, VNR will generate over $3.00/unit cash flow from operations (net of dividends on the preferred shares) in 2016. If you take a long-term view and value VNR as if it were a C-Corp. it is worth AT LEAST 4X CFPS.
Post LRE and Eagle Rock mergers, VNR has hedges in place for 2016 that cover:
> 69% of their natural gas at $4.35/mcf (I use $3.25/mcf in my forecast)
> 59% of their crude oil at $83.27/bbl (I use $60/bbl in my forecast)
> 21% of their NGLs at $30.31/bbl (I use $14/bbl in my forecast)
I have an 11/9/2015 detailed report on VNR from Stifel. If you want to see it, send me an e-mail. dmsteffens@comcast.net
Based on my forecast model, VNR will generate over $3.00/unit cash flow from operations (net of dividends on the preferred shares) in 2016. If you take a long-term view and value VNR as if it were a C-Corp. it is worth AT LEAST 4X CFPS.
Post LRE and Eagle Rock mergers, VNR has hedges in place for 2016 that cover:
> 69% of their natural gas at $4.35/mcf (I use $3.25/mcf in my forecast)
> 59% of their crude oil at $83.27/bbl (I use $60/bbl in my forecast)
> 21% of their NGLs at $30.31/bbl (I use $14/bbl in my forecast)
I have an 11/9/2015 detailed report on VNR from Stifel. If you want to see it, send me an e-mail. dmsteffens@comcast.net
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group