Kinder Consolidation a Big Bet on Shale: Dicker

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Aug. 12 (Bloomberg) -- Dan Dicker, president at MercBloc, discusses the consolidation move by Kinder Morgan, what it means for master limited partnerships and how it may set a precedent for shale exploration companies. He speaks on “Market Makers.”

This is more on the infrastructure surrounding shale oil assets.

That is a big that an a big difference in the industry.

Some of the mlps are going to follow him in this.

They're going to need the capital to buy and more -- more and more hype lines and processing plants.

Is this a function of size?

I think that is a great name.

Energy transfer seems number one on the list.

Enterprise could benefit.

We're looking at numbers and talking about market caps in the $100 billion area.

These are huge companies.

I would put this as the last possibility to turn back from an mlb structure.

Why is there a disadvantage?

It strands your capital that you would normally use to continue to build out the network.

It continues to drop down assets and take your capital and turn it into debt in your sub corporations.

It strands your capital and makes it more difficult to borrow.

It does not get investors to come in and keep your cash flow going so you can build out.

This happens as you get larger.

As more of the mlps that you own, you own a bigger percentage and that leaves you cash constrained.

Does it surprise you to see the parent company trade up 9%? this roll up involves them paying significant premiums.

There are two things and a bit today.

One is the increasing dividend.

That will calm everybody's nerves.

That is a big plus.

When you're talking about a bond like stock, that will make it move.

I think the market understands the strategy.

He has been underperforming and changed back to a c corp.. that is what they are betting on.

I think it is a great buy.

What are the chances that that is wrong?

Five years ago we were talking about natural gas imports and now we are talking about exports.

This can change on the diamond.

He expects -- he is way in the stratosphere.

If that happens the infrastructure is totally lacking.

The second thing was the noble report where chuck davidson said this was a lack of infrastructure in colorado.

These are cases where you know it is not about the production but the pipelines.

The biggest winners won't be the emp players.

The producers of oil -- the people that own the toll roads.

We heard him in the call.

I was speaking to an analyst who is not convinced he is going to go out with a blank check and buy all these companies.

This is the kind of nimbleness that he needs to buy smaller.

Smaller pipelines and maybe not something as large.

In the case of kingder, it a consolidation play?

I think it is both.

I think it is going to be both.

The simplest way is to buy as opposed to build.

Where it needs to be built thrash, they will build.

It is such a great pleasure to have you.

Coming up, all their worries

This text has been automatically generated. It may not be 100% accurate.

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