The first MLP IPO of 2013 debuted on Jan. 15. USA Compression Partners (NYSE: USAC), which I mentioned in last week’s issue, provides compression services for the oil and gas industry. Units have advanced 36 percent since the IPO, and at the current price yield 7.3 percent.
The day after the USA Compression Partners IPO, CVR Refining (NYSE: CVRR) made its debut. CVRR was spun off from CVR Energy (NYSE: CVI), and both companies remain majority-owned by Carl Icahn. CVR Refining’s primary assets are two refineries located in Kansas and Oklahoma with a combined processing capacity of approximately 185,000 barrels per day (bpd). These refineries are strategically located near the major Cushing, Oklahoma shipment and storage hub, with easy access to discounted feedstock from the nearby Permian basin, as well as the Bakken shale and Canadian oil sands.
But refiners have struggled with diminished margins in 2013 because of a much lower Brent-WTI differential. After the recently concluded second quarter, CVRR declared a distribution of $1.35 per unit, bringing its per-unit distributions for the first half of the year to $2.93. At the same time, CVR Refining lowered its annual distribution target to a range of $4.10 to $4.80 per unit. This was lower than the outlook issued in March, when it foresaw annual distributions of $5.50 to $6.50. CVRR units slid on the news, and are presently trading slightly below the $25 IPO price. The lower end of the revised forecast implies distributions of $1.17 per unit in the second half of the year, for a forward annualized yield of 10 percent based on the recent $23.50 unit price.
SunCoke Energy Partners (NYSE: SXCP) was the third IPO to debut during a very busy third week of January. SXCP is the first MLP to produce coke, a coal-like solid f! uel used in the blast furnace production of steel. SXCP’s sponsor is SunCoke Energy (NYSE: SXC), the largest independent producer of metallurgical coke in the Americas.
SXCP operates two cokemaking facilities in Ohio, and has long-term take-or-pay contracts with two of the largest blast furnace steelmakers in North America. Distributable cash flow (DCF) in second quarter 2013 totaled $18.7 million. The expected cash payout was $13.5 million, for a second-quarter coverage ratio of 1.38. SXCP’s second-quarter cash distribution was $0.4225 per unit, following a first-quarter distribution of $0.3071 per unit. Based on the recent price of $24.30, the annualized yield based on the previous quarter is 7 percent, and the unit appreciation since the IPO has been 33 percent.
New Source Energy Partners (NYSE: NSLP) debuted in February, and became the first upstream MLP IPO of the year. New Source Energy is engaged in the development and production of onshore liquids-rich conventional resource reservoirs in east-central Oklahoma. As of the end of 2012, the partnership’s properties included ~ 14.2 million barrels of oil equivalent (MMBoe) total proved reserves with a ~72 percent liquids/28 percent gas split. Commodity derivative contracts cover approximately 79 percent of estimated total production for 2013 and 2014.
Since the Feb. 8 IPO, NSLP units have appreciated by 7 percent. The annualized yield based on the most recent quarterly distribution is 10.6 percent. DCF coverage for the quarter was 1.0x, but the partnership expects this to improve going forward, as quarterly results were hurt by flooding.
On April 10, KNOT Offshore Partners (NYSE: KNOP) launched, and units have risen nearly 11 percent since. KNOP owns and operates shuttle tankers under charters of five years or more. A shuttle tanker is a specialized ship designed to be an alternative to pipelines in some situations. The tanker transports crude oil and condensates from offshore oil fields to onshore termin! als and r! efineries.
Following Q2, KNOP declared a quarterly cash distribution of $0.3173 per unit. The distribution was prorated from the closing date of the initial public offering, and corresponds to $1.50 per outstanding unit on an annualized basis. At the present unit price, this equates to a 6.2 percent annual yield.
Emerge Energy Services (NYSE: EMES) had a tepid opening on May 9, but in late May the partnership began a steady climb that has seen its unit price rise 82 percent since the IPO. Emerge Energy Services operates in two segments of the energy industry: Sand Production and Fuel Processing and Distribution. Through its subsidiaries, Emerge Energy Services provides products and services to both the upstream and midstream energy segments.
Emerge Energy Services is, like CVR Refining, a variable distribution MLP. Such MLPs have no minimum quarterly distribution and no implied promise to keep the payout steady or growing. The distributions vary with the cash flow of the MLP. For the second quarter, the prorated distribution was $0.70 per unit, 13 percent higher than projected in the IPO prospectus. This prorated distribution projects to an annual yield of 9.2 percent.
Tallgrass Energy Partners (NYSE: TEP) is a midstream limited partnership that provides natural gas transportation and storage services for customers in the Rocky Mountain and Midwest regions of the US. The partnership launched on May 13, and after initially rising, units were trading back at the IPO price by late June.
In late June the partnership increased EBITDA guidance above analysts’ expectations and units began to climb. They are presently up 8 percent since the IPO. The second quarter DCF coverage was 1.07x, with guidance for 1.2x for the entire year reiterated on the Q2 conference call. The prorated quarterly cash distribution for Q2 was $1.15 on an annualized basis, corresponding to an annual yield of 4.9 percent at the current unit price.
Hot Canadian Stocks For 2014: United States Steel Corporation(X)
United States Steel Corporation produces and sells steel mill products in North America and Central Europe. It operates in three segments: Flat-rolled Products (Flat-rolled), U. S. Steel Europe (USSE), and Tubular Products (Tubular). The Flat-rolled segment offers slabs, rounds, strip mill plates, sheets, and tin mill products, as well as iron ore and coke. This segment serves service center, conversion, transportation, construction, container, and appliance and electrical markets in North America. The USSE segment offers slabs, sheets, strip mill plates, tin mill products, and spiral welded pipes, as well as heating radiators and refractory ceramic materials. This segment serves the European construction, service center, conversion, container, transportation, and appliance and electrical, as well as and oil, gas, and petrochemical markets. The Tubular segment offers seamless and electric resistance welded steel casing and tubing; and standard, and line pipe and mechanical tubing. It primarily serves customers in the oil, gas, and petrochemical markets. The company also provides transportation services, including railroad and barge operations. In addition, it owns, develops, and manages various real estate assets, which include approximately 200,000 acres of surface rights primarily in Alabama, Illinois, Maryland, Michigan, Minnesota, and Pennsylvania; participates in joint ventures that are developing real estate projects in Alabama, Maryland, and Illinois; and owns approximately 4,000 acres of land in Ontario, Canada. The company was founded in 1901 and is headquartered in Pittsburgh, Pennsylvania.
Advisors' Opinion:- [By Michael Flannelly]
BMO Capital analysts initiated coverage on United States Steel Corporation (X) early on Wednesday, giving the stock a “Market Perform” rating because the company will be negatively impacted by lower steel prices.
The analysts see shares of X reaching $19, which suggests a 7% downside to the stock’s Tuesday closing price of $20.51.
US Steel shares were down a fraction during pre-market trading on Wednesday. The stock is down 14% year-to-date.
- [By Roberto Pedone]
Another stock that looks poised to trigger a big breakout trade is U.S. Steel (X), which is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe. This stock has been hit hard by the sellers so far in 2013, with shares off by 22%.
If you take a look at the chart for U.S. Steel, you'll notice that this stock has been trending sideways and consolidating for the last three months and change, with shares moving between $15.76 on the downside and $19.70 on the upside. Shares of X have just started to trend back above its 50-day moving average of $17.87 a share and it's quickly pushing within range of triggering a big breakout trade above the upper-end of its sideways trading chart pattern. If this breakout hits soon, then it would take X out of its consolidation pattern and potentially into a new uptrend.
Traders should now look for long-biased trades in X if it manages to break out above some near-term overhead resistance levels at $19.26 to $19.40 and then once it clears more resistance at $19.70 with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action 7.31 million shares. If that breakout triggers soon, then X will set up to re-test or possibly take out its next major overhead resistance levels at $21.30 to $24, or even $25 a share.
Traders can look to buy X off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $17.87 a share, or below more support at $16.86 a share. One could also buy X off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.
This stock is another favorite target of the short-sellers, since the current short interest as a percentage of the float for X is very high at 30.1%. This stock could easily see a powerful short-squeez
- [By Ben Levisohn]
Goldman Sachs boosted its rating on US Steel (X) to Buy from Sell, along with that of AK Steel (AKS) and Steel Dynamics (STLD). Axiom Capital Management’s Gordon Johnson responds with a great big “huh?” in regards to the US Steel upgrade, especially as it relates to OCTG–oil country tubular goods.
ReutersHere is what Goldman’s�Sal Tharani and Chelsea Bolton write about US Steel and OCTG:
…we see continued strength in the flat rolled markets in the upcoming seasonally strong steel demand period as another driver of the stock in the near term. By our estimate, closure of three steel plants owned by bankrupt RG Steel, and the permanent shut down of Hamilton plant by US Steel, has more than offset the new capacity additions in the flat rolled market since 2008. As demand improves through continued recovery in auto and industrial markets, and new OCTG capacities under construction in the US begin to ramp up, we see a market improvement in flat rolled steel demand making this market tight in the coming months, from over-supplied just a few months ago.
Now, here’s Johnson’s “huh.” He writes:
Goldman argument ��added OCTG capacity creates OCTG demand: Huh? Again��Huh? This is also among the most confusing/perplexing of the arguments made. One of X�� largest earnings contributors is its OCTG segment. The GS report argues that more OCTG capacity will create more OCTG demand. Huh? Rig counts create demand, not the build-out of OCTG capacity (this makes absolutely NO sense to me ��someone please correct me if I�� wrong here). Further, if more OCTG capacity is built, this is be a negative for X�� most profitable segment. Thus, I don�� see how this is a positive. This is one of the points I just did not get at all.
Any thoughts?
Hot Canadian Stocks For 2014: NEW GOLD INC.(NGD)
New Gold Inc. engages in the acquisition, exploration, extraction, processing, and reclamation of mineral properties. The company primarily explore for gold, silver, and copper deposits. Its operating properties include the Mesquite gold mine in the United States; the Cerro San Pedro gold-silver mine in Mexico; and the Peak gold-copper mine in Australia. The company also has development projects, including the New Afton gold, silver, and copper project in Canada; and a 30% interest in the El Morro copper-gold project in Chile. The company was formerly known as DRC Resources Corporation and changed its name to New Gold Inc. in June 2005. New Gold Inc. was founded in 1980 and is headquartered in Vancouver, Canada.
Advisors' Opinion:- [By Ben Levisohn]
Bridges favorite stocks include Goldcorp, Newmont, Eldorado Gold (EGO) and New Gold (NGD).
Note, however, that these recommendations are all qualified in one way or another. Investors should keep that in mind before going all in on the gold miners.
- [By Ben Levisohn]
Even bad news has failed to dent the rise in gold stocks today. NewGold (NGD), for instance, has gained 1.8% to $7.49 despite the fact that the wall of one of its mines collapsed. The Wall Street Journal has the details:
- [By Ben Levisohn]
One group of stocks not feeling the optimism today: Gold miners. With fewer concerns that a U.S. attack on Syria will be disruptive and more evidence that tapering will begin this month, the price of the precious metal has dropped 1.6% to $1,388.90 an ounce–and gold stocks are falling with it. New Gold (NGD), for one, has dropped 3% to $6.55, while Barrick Gold (ABX) has fallen 1.3% to $19.25.
Top 10 High Tech Stocks To Invest In Right Now: Newmont Mining Corporation(Holding Company)
Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company?s assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. As of December 31, 2009, it had proven and probable gold reserves of approximately 93.5 million equity ounces and an aggregate land position of approximately 27,500 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.
Hot Canadian Stocks For 2014: Goldman Sachs Group Inc.(The)
The Goldman Sachs Group, Inc., together with its subsidiaries, provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Its Investment Banking segment offers financial advisory, including advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense, risk management, restructurings, and spin-offs; and underwriting securities, loans and other financial instruments, and derivative transactions. The company?s Institutional Client Services segment provides client execution activities, such as fixed income, currency, and commodities client execution related to making markets in interest rate products, credit products, mortgages, currencies, and commodities; and equities related to making markets in equity products, as well as commissions and fees from executing and clearing institutional client transactions on stock, options, and fu tures exchanges. This segment also engages in the securities services business providing financing, securities lending, and other prime brokerage services to institutional clients, including hedge funds, mutual funds, pension funds, and foundations. Its Investing and Lending segment invests in debt securities, loans, public and private equity securities, real estate, consolidated investment entities, and power generation facilities. This segment also involves in the origination of loans to provide financing to clients. The company?s Investment Management segment provides investment management services and investment products to institutional and individual clients. This segment also offers wealth advisory services, including portfolio management and financial counseling, and brokerage and other transaction services to high-net-worth individuals and families. In addition, it provides global investment research services. The company was founded in 1869 and is headquartered in New York, New York.
Hot Canadian Stocks For 2014: Yamana Gold Inc.(AUY)
Yamana Gold Inc. engages in gold and other precious metals mining, and related activities, including exploration, extraction, processing, and reclamation. It also explores for copper, molybdenum, zinc, and silver metals. The company's portfolio includes 7 operating gold mines namely Chapada; El Pen Advisors' Opinion:
- [By Matt DiLallo]
What's the outlook for gold?
We already know last quarter was the worst quarter for gold since the start of modern gold trading. The 23% free fall in the price of gold hit gold mining stocks hard: for example, Yamana Gold� (NYSE: AUY ) plunged 38%. Because of that, analysts have already been reducing expectations of gold miners by ratcheting down earnings estimates. Analysts have already slashed 28% off Yamana's consensus bottom line, which might not be enough because the company had missed estimates in four of the past five quarters. This is where Freeport's more diversified portfolio should really shine. This quarter alone, that diversification has helped to insulate it from the free fall in gold mining stocks -- Freeport's stock was down just over 16%.�
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