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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: gcrispin who wrote (52572)	10/22/2013 2:01:47 PM
From: E_K_S	Respond to of 78530

Hi gcrispin - Devon Energy Corporation (NYSE: DVN) - Missed this one but learning the locked-up value in these midstream assets QEP Resources, Inc. (NYSE: QEP) - Started small position in QEP thinking there is more value in their midstream operations (QEPM). I am trying to find the best way to invest in these large E&P companies that have midstream assets that could be spun off and/or create a drop down MLP. It looks like there are two ways for these to go. One method is a drop down MLP similar to what SEP has done. SEP becomes the General Partner, will operate the unit and maintain some type of ownership interest w/ incentive bonuses. The other option is to spin off the MLP as a separate company, let them grow their operation expanding capacity and/or merge w/ other Mlp's and/or become an acquisition target for the very huge Mlp's that must grow by acquisition. The value investor will generally own the parent company looking for some type of disposition of their midstream operation. I do like DVN's approach as they will maintain some interest in their midstream assets and in fact w/ their announced deal have a better midstream operation controlling a larger footprint in the region. For this, they gave away almost 50% of their ownership interest and will own shares of the MLP that will generate income for DVN and/or could be sold down over time. QEP recently created a drop down MLP through an IPO (QEPM) that was priced to yield 5% and seemed to be received by the street w/ ok enthusiasm ( priced at $21.00/share). ( Note: The public now owns an approximate 42.2% limited partner interest in the Partnership. QEP, through certain of its subsidiaries, holds, a 2.0% general partner interest, all of the Partnership's incentive distribution rights and an approximate 55.8% limited partner interest in the Partnership.) . Now it was disclosed than an activist investor owns 7.5% of QEP (the parent) wants them to sell their entire stake in QEPM including their general partnership interests. Therefore, this investor (JanaPartners) still believes there is unlocked value in these assets and continue to buy into QEP. So for me, do not be too fast to sell your cheap DVN shares. I started a small position in QEP hoping to eventually trade those shares in for QEPM shares. Maybe QEP will distribute those shares to the shareholders and/or sell them in the open market (that may bid down QEPM) so i can swap into new QEPM shares. I expect the small midstream stand alone MLP's to eventually get gobbled up by the larger players. Partnership units are used as currency so even if/when they overpay, no big deal. I hope to own several of these small operations and when the dust settles have units in the mega Mlp's like KMI, I am not too sure how is all plays out but it's a 5-7 year work in progress. EKS

To: gcrispin who wrote (52572)	10/23/2013 10:05:51 AM
From: Spekulatius	1 Recommendation Recommended By Jim P. Read Replies (2) \| Respond to of 78530

They left money on the table because the implied valuation of XTXI and XTEX is higher than justified, imo. XTEX/XTXI a mediocre MLP and almost imploded during the financial crises. It's mostly a gatherer and a lot of their contracts are commodity/spread sensitive, which makes their earnings volatile. I don't think that their management is the strongest either. DVN's MLP has everything that XTEX needs -fee based revenues (which is the way DVN structured the MLP), dropdown potential from their E&P operations, strong sponsor (GP), investment grade credit rating. The moderate scale gain through the combination does not justify the merger. I think DVN was disappointed by the initial reaction to their S1 filing, and then decided they needed to do something quick to unlock the value of their MLP (for which they were given very little credit for). I think they would have done better LT, if they had gone alone or found a better partner. I am not complaining, the shares now reflect the value of the midstream operations and i sold some of my shares at a decent profit. Besides, have you noticed that crude prices are going down quickly?