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Re: This week's SA articles That's what I thought. But I always get confused when I see natural gas volumes. I assume mm means millions but I never remember how to convert btus into actual volumes. But those are the numbers Mr. Boyd gave, and I assume they came from CHK's filing to walk away from the contract. 3 possibilities: 1. CHK misstated the numbers. 2. Mr. Boyd got a decimal place off (or maybe the "mmbtu" should be "billion BTU" or something like that. Or my favorite 3. CHK needed to pay something to get out of the original contract and it was in both parties' best interests to hide the payment. . It appears (and I haven't researched this; it's just something I inferred from the article) that CHK had contracted for much higher volumes of gas, and the new contract significantly reduced the required volumes. The pipeline carries 2.4 million/billion whatever units of nat gas per day and the article says CHK took more than half of that volume initially. So maybe 1.2 million/billion units per day. The new contract reduced the contracted volumes to 500,000, a cut of 60%. So maybe CHK was paying to get out of the original contract and accepted the higher rate as a way to pay to get out. I am actually more interested in the assertion that ET often contracts for prices that are higher in the early years and then drop off a cliff. If that's true, and if this is material, then it throws doubt on all of ET's coverage ratios. But I'll check the comments and see if there's some clarification. Probably I'm just wrong and will have to delete this post. EDIT after reading the comments. I said CHK took more than half the capacity on the pipeline. Actually, the article says "almost half". So small correction. And the comments talk about the pricing and whether ET should be straight-lining the revenue for GAAP purposes, but no one questions the pricing. There is another possibility, though. Mr. Boyd says the 2016 contract renegotiation "slightly tweaked" the prices from the original contract. The original contract goes back to at least 2010 and probably earlier, when natural gas prices were much higher. So maybe the prices were negotiated long ago and included some premium to get ET to build the pipeline? No idea, but the numbers seem to be correct. |
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Msg # | Subject | Author | Recs | Date Posted |
121174 | Re: This week's SA articles | Tex7779 | 2 | 7/11/2020 11:01:07 AM |