Hello all and good morning. Welcome to the 9th floor, where Cain Hammond Thaler has returned for a few hours in this dreary rainy afternoon to work through some paperwork, before gathering his coat and hat and heading out the door again.
The big news for the 9th Floor out last week was earnings out of HCLP and ALDW.
HCLP took a hit on news that they offered some concessions to customers, who are all hurting from low oil prices and desperate to get their operating costs down. It’s unclear what the value of those concessions are to me, at this point, but the trade off here is that for momentary pricing concession, HCLP got customers to lock into greater volumes and contract durations. Provided those customers survive (and HCLP is obviously betting that they will), HCLP is sitting on a pretty payoff down the line.
Outside of that, HCLP also entered into a partnership to develop an energy rail hub in the Permian and DJ basins. Does this sound like a company prepared for US fracking to dry up? HCLP is betting directly that we’ll be back to good times in the US oil market by the second half of this year.
ALDW announced a solid earnings beat, with earnings per share rising to $0.39 per share, up from just $0.01 per share from the same quarter in 2014. Income available to shareholders rose to $0.30 per share, up from $0.06 year over year.
ALDW is benefitting greatly from the lower WTI prices. This company is the hedge to my positioning, should I prove dreadfully wrong. If oil prices keep spiraling lower, ALDW should help keep my head above water as their operations outpace from cheap input costs.
The beauty about ALDW is that yes they are doing great because WTI prices are way down, but when I looked through their books I liked them so much I would have bought them even if it wasn’t.
That’s all for now friends. I shall see you later this week (turns the light off).
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In my opnion, EMES is a more attractive buy than HCLP.
Not sure why?. Help has a pretty safe but serious dividend. Lots of long term contracts. I suppose if oil goes to 30 and stays there, everything oil related will collapse, but hcop is low debt and likely to be a survivor. My two cents .