As unit holders surely know, CEQP is not the simplest of MLPs in the energy universe to understand. There are grey areas some will find difficult to assess. An example might be Ford's analytics posting this stock earns their designation "Strong sell." Delving into Ford's reasoning, I find they are comparing statistics dating back to 2011. For whatever their reason (s), I view their logic as just fine. But I find serious fault in their premise. My favorite example of what I'm talking about is this:
4+4= 10.
No, you say? Well, now.....let's just consider that in a different world, 2+2= 5. So we've now pinpointed a deciding factor that will skew all possible deductions, right?
My issue with Ford lies in its recognizing that CEQP has not been the cash generator of, say, five or six years ago. My response would be: "What MLPs have managed to continue their earnings platform in a continuing pattern if we go back to pre-energy sector "heartburn" onsets? I contend it is not realistic to measure by this exceedingly simplistic premise regardless of the logic.
I also smell the absence of Ford in CEQP's book management. This is to say that Ford doesn't appear to be closely allied and aligned with the company's deal-making. We need to be ever vigilant when it comes to sensing manipulative reasons for strong assertions clearly moving in contrary motion.
Finally, CEQP's appeal to most retail investors will center on distribution amounts/yield and DCF coverage. In short, are distributions sufficient for the retail crowd to find appealing longer term and if so, how sustainable is the payout schedule? In CEQP's case, coverage doesn't get much better. From the 8-K filing of this morning, our company reversed the prior reporting period's loss to a small but important profit. It's the reversal that has my attention. As for distributable cash flow (DCF)? Cash flow paid to us unit holders is measured in terms of sustainability. We recognize this as "coverage," meaning that the company has money to cover the expense of paying us the 60 cents we'll receive on the 14th of this month. Coverage is 1.5 times what they are paying out! This is far better than necessary to keep this happy camper eating.
It's important that we investors read between the lines as there will be occasions on which analytical companies will deliberately skew things for whatever their intent. It is for us to understand. I hope this helps somebody.
Addendum: My analysis above started with the inordinate rise in valuation apparent out of the chute when trading began this morning. My thinking is that there were enough investors out there who not only want to capture the fat distribution that will be locked in very shortly, but they are also digesting content such as you'll find above in this missive. either way, it's so nice to see our units traveling well above $25. I've been expecting as much and it's always reassuring to find things assembling in like fashion in the minds of others.
Have a good day!
