On Wednesday, November 4th Tallgrass Energy Partners released their Q3 earnings and provided management comments.  The Q3 results were reported after Plains All American, which disappointed the market with a flat outlook for 2016 and comments about excess capacity for crude logistics..  Tallgrass Energy provided the market with the following details

-  Management has a long term outlook, no just the 90 day cycle which investors focus

-  Strong performance in Crude Logistics from Pony Express from higher transportation revenues on 10% higher volumes, trending higher as of November

-  Shipper Deficiencies of $8.3MM, (25k barrels per day lower than committed volumes)

-  $150mm of liquidity available from credit revolver with a low 2.6x Debt/EBITDA ratio

-  Ready for a bond offering, but awaiting attractive terms

-  Management expects to exceed EBITDA, DCF and Growth Estimates set at the beginning of 2015

QUESTIONS AND ANSWERS

On Distribution Growth going forward?  Management expects 20% through 2017, but cautions investor that growth will not be linear

On Volume Declines?  Management has not seen any indications of decline across their four supply points.  Numerous wells drilled but uncompleted and production continues to flow

On REX Contract Rollovers?  It is contractually full and is adding new capacity for next year.  Contracts roll off in 2019 and contract re-negotiations will start in 2018, and management expects all capacity to be contracted, but rates rates are uncertain

On Financing and Drops?  Final Pony Express drop will be made likely in Q1 2016 and management believes they have debt and revolver alternatives and have been approached for equity issuance.

On M&A Options?  Bid Ask spread is still too wide, but nearing potential acquisitions, and may announce in next quarter or two

On Shippers reselling excess Capacity?  Pony is running at full capacity in November, despite MVC deficiencies which are very short term in nature.  If it was happening, TEP would not be aware of such arrangements.  

Is Tallgrass Exposed to Commodity Prices?  Only 2% of their EBITDA is exposed via processing contracts.  Contracts have a demand and commodity fee component, the former is paid regardless of volumes

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