Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

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Thegipper
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by Thegipper »

newin96 wrote: 11 Aug 2017 20:37 If they truly are being dragged down because of ETF related energy groupings, and the fundamentals remained solid it would be a buying opportunity - is this a chink in the efficient market hypothesis brought on by the emergence of ETFs?

As an aside I'm not proud of my run-on sentence.... :roll:
That's okay. I do that all the time and I was a product of the public education system. I don't like the language cops . The language cops like using this technique when they want to change the discussion.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by IdOp »

If there is a problem with energy grouping, that's really a problem with the slice-and-dice sector sprawl that ETFs have morphed towards, and it's reflective of active management as opposed to total market indexing.

I disagree that the EMH was brought on by ETFs, it was there long before ETFs showed up. And, Sharpe's arithmetic does not rely on EMH either.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by Thegipper »

IdOp wrote: 11 Aug 2017 23:11 If there is a problem with energy grouping, that's really a problem with the slice-and-dice sector sprawl that ETFs have morphed towards, and it's reflective of active management as opposed to total market indexing.

I disagree that the EMH was brought on by ETFs, it was there long before ETFs showed up. And, Sharpe's arithmetic does not rely on EMH either.
The oil ands sector has a bad day Enbridge and other pipelines have a bad day. Coincidence ? If they were not lumped in as energy companies and were put in with transportation, industrials or utilities I believe this tendency would be mitigated. I have avoided oil nd gas stocks for at least 4 years. I have owned Enbridge and just seems to track oil and gas. It shouldn't because it basically transports a product for a toll or shipping charges. Not unlike CN or CP.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by IdOp »

Thegipper wrote: 12 Aug 2017 09:04
The oil ands sector has a bad day Enbridge and other pipelines have a bad day. Coincidence ? If they were not lumped in as energy companies and were put in with transportation, industrials or utilities I believe this tendency would be mitigated. I have avoided oil nd gas stocks for at least 4 years. I have owned Enbridge and just seems to track oil and gas. It shouldn't because it basically transports a product for a toll or shipping charges. Not unlike CN or CP.
Well, IPL's earnings came out Thursday, so maybe the market (for pipelines) was reacting to that as well.

But that aside, I wasn't actually trying to disagree with you, maybe there is some inappropriate categorization there. I was trying to say that the existence of these sector ETFs and the actions of those who (perhaps sometimes indiscriminately) buy and then dump them are the result of active management and the sales machine. These things to me are the "bad part of ETFs", but don't apply to all ETFs. Upon re-reading newin96's post I think now he was trying to point out a possible inefficiency mechanism related to some ETFs only. At first I had read "the emergence of ETFs" as referring to the early ones which tended to be broad-market ETFs. That was probably my fault for not reading carefully enough. :oops:

To help cure the off-topic I created, my IPL story is that I bought some in late 2015 around Friday's price. I do recall when I bought it IPL seemed to have pretty good dividend coverage (low payout) so that swung me towards it. It went all the way up to $30 and now it's back here again. Maybe it's a buying opportunity again, but sometimes these downdrafts have follow-through, so who knows. Rising rates might not be so kind to the sector either. Think I'll watch and wait a bit before deciding to buy any more.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by Londoncalling »

I have been a relatively long time holder of IPL (5 +years) at a price of $16.xx. At the time of purchase it was in the high 6% distribution range as IPL.UN. It has treated me well with growing dividends and share price appreciation. I even trimmed a few years ago in the mid 20s. I am still over weight. Am I interested in buying after such a huge pullback? yes. will I act on that interest. not likely. I am overweight the stock but feel it is oversold. However, what do I know it could stay low for quite some time or fall even further on a full market correction. That being said sometimes I get silly and make an swing trade.

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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by Taggart »

IPL has performed well in my portfolio this past month, so perhaps things are looking up.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by 2 yen »

Taggart wrote: 01 Oct 2017 05:22 IPL has performed well in my portfolio this past month, so perhaps things are looking up.
Oil has gone up a bit, so maybe people are feeling better. My take on these companies (IPL, KEY, PIF, etc.) is that disruption will affect them to some degree. Since the jury is out on when and to what degree, I am not buying more of any of them. In doubtful moments, I tell myself that the non-internal combustion engine fossil fuel derivatives will remain in great demand and perhaps increase quite a bit, so I should be careful going whole hog and selling all non-renewables.

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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by nisser »

The major reason IPL is down is because they are plannign to divest 3b+ into some sort of plastics factory. It may be a great thing or 3billion down the drain.
I have quite a bit of it a cost of ~22-23$. I think if you've thought about getting some oil exposure nearly 4 years into this downturn is probably a good time to start dipping your toes into it.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by AltaRed »

With the NDP gov't looking to add jobs by building petro-chemical facilities, both PPL and IPL have developed proposals to produce polypropylene in Strathcona County, AB primarily for export. PPL has a Kuwati partner. It appears IPL may be going it alone.

https://www.pressreader.com/canada/calg ... 8319675270

I don't think much of politically subsidized facilities to make the economics work and betting the farm on cheap feedstock. Without continued subsidization by the AB gov't, there is no way AB based petro-chemicals can be competitive with huge US (and Middle East) facilities on tidewater. The only way Novacor did it (near Red Deer) is through huge subsidies and gov't mandated feedstock circa Peter Lougheed in the '70s (I think). I would NOT be betting on these being long term double digit ROE/ROCE returns.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by schmuck »

BMO Capital raised IPL to outperform a week ago with a target price $27.
BMO said its rating is based on above-average div yield of 7%, premium long life assets with high-credit counterparties, significant optionality in intra-Alberta oil sands projects and the attractive valuation.
BMO still expects cash flow per share of $2.47 for 2017, $2.40 for 2018, and $2.45 for 2019.

That said, I took the opportunity to trim my position Friday morning when it hit $26 plus. I've held it for about 15 years and it will remain a core position. With a substantial holding of TRP, along with some PPL and a bit of ALA, I had been thinking of reducing my overall pipeline exposure for some time.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by AltaRed »

I agree BMO is directionally right when looking at IPL's existing business, albeit I believe they are over optimistic on optionality in the AB oil sands business. I don't think a $3B investment in Notley's petro-chemical dream will be all that rewarding to shareholders.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by Dudsy »

Taggart wrote: 01 Oct 2017 05:22 IPL has performed well in my portfolio this past month, so perhaps things are looking up.
I watch propane/butane prices; they're up 70 - 80% over last year and have been since early August. IPL should have a very good quarter. I bought IPL around a month ago; I couldn't understand the aggressive selling from Aug all the way up to mid-Sept. Was it interest rate concern's?

IPL has touted their commodity 'de-risking', which indeed was true up until last year... however, less so now with the Williams acquisition. NGL's are a volatile business so this is not a buy and hold stock for me.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by AltaRed »

I agree the mid-stream is highly volatile due to the highly variable input cost (feedstock) and product prices. Margins can be all over the map. Money can be made but the business is harrowing and life shortening. I was assigned to the gas and gas liquids marketing business for awhiie in my career (albeit a century ago) and I was happy to get out of it when I could. Which is why I liked it when ALA got out of the commodity business and stuck strictly to COS (cost of service). I'd suggest IPL ownership is becoming a trade, rather than a buy and hold investment.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by 2 yen »

https://ca.finance.yahoo.com/news/inter ... 36624.html

Plastic is not dying so I like this move by IPL to build a huge plastics plant in Alberta. Obviously the market did not (down 2+% today) - because of the added debt and equity dilution.

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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by AltaRed »

A nagging question I would have is the assumed price of propane feedstock to make the plant profitable and what prices propane will fetch when AltaGas will have its propane export terminal on Ridly Island in operation in 2019. Seems like a lot of investment being undertaken based on one feedstock, i.e. propane, that may not be sufficient over 30+ years. Presumably IPL's bankers did their due diligence though. Then there is PPL with their foreign partners doing something in the mid-stream too. Too many moving parts for me to figure out, but on the surface, I find it hard to imagine all these projects being sustainable.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by Taggart »

I own shares in IPL and I'm hoping it doesn't become another TransCanada Pipeline (circa 1999).
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by AltaRed »

Taggart wrote: 18 Dec 2017 16:46 I own shares in IPL and I'm hoping it doesn't become another TransCanada Pipeline (circa 1999).
I remember that well and a short conversation I had with Doug Baldwin at the time on it (we were having a United Way function at the time and he was the executive chairman of the drive that year). TRP had lost its way getting involved in businesses it had no business being in. At least IPL is sticking close to home with a business it should no difficulty understanding....but does it really? Projecting feedstock and product prices 30 years out feels about as uncertain as standing nude in the local mall.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by Dudsy »

Projecting feedstock and product prices 30 years out feels about as uncertain as standing nude in the local mall.
IPL is targeting 70-85% take-or-pay contracts. According to RBC, "The take-or-pay agreements are structured to provide a fixed return on capital plus a recovery of variable and fixed operating costs as well as transportation costs. The company stated that it has no exposure to propane and polypropylene commodity price volatility under the third-party take-or-pay contracts" How much of the capex/opex is flowthrough vs fixed ends up being the bigger long-term risk for IPL.

Intelligent utilities and financiers aren't projecting feedstock and product prices for 30 years out. They're mitigating their risk via offtake contracts and where commodity risk remains, understanding the dynamics of the plant vs the polypropylene marginal cost curve.

I don't own IPL now, but it has been an interesting short-term trade at times for me, especially as they've increased their NGL exposure over the last several of years.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by AltaRed »

Okay, that makes sense. Take or pay contracts do not necessarily have pricing formula baked in but it appears in this case they do, for obvious reasons. This looks to me more like a COS contract, combined with a take or pay volume commitment.

It is not something I would have committed to as a producer in my career BUT these are not normal times with producers walking the thin edge of cash flow positive these days with nowhere to store/keep excessive volumes of propane, with a risk of a negative return.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by 2 yen »

A very negative opinion on IPL's dividend going forward.

https://ca.finance.yahoo.com/news/inter ... 17909.html

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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by AltaRed »

The linked article is a naive assessment of IPL BUT it has merit with respect to sulphur content. That said, upcoming lower sulphur content is a well known issue by the industry throughout the globe and refineries are (have been) gearing up for it. Refineries will have to deal with it because a lot of oil production around the world has sulphur content, e.g. WTS (West Texas Sour), and oilsands upgraders are also dealing with it. So.... oilsands production that is upgraded will have much of the sulphur problem deal with at source, while dilbit with sulphur that is exported will be dealt with in refineries. Could it cause spreads to increase further between sweet (low sulphur) and sour (higher sulphur) crudes? I would expect so but how much depends on the additional cost of ugpraders/refineries processing crudes with higher sulphur content. Maybe another $1-2/Bbl (speculation on my part).

The article doesn't deal with a higher near term risk that I have previously mentioned, i.e. frac spread on NGL processing income, nor does it mention higher earning potential once more takeaway capacity is in place, nor earnings eventually from their petro-chemical project. My view is unchanged. There is no near term potential for a dividend increase at least until 2020 and there is near term downside risk due to sharp decreases in NGL processing income.

To me, shipping decreases due to shrinking oilsands production (and earnings loss) due to sulphur specification changes are a very long shot effect simply because the producing and refining industry is already acutely aware of it and it is my view no responsible O&G production company would be making new investment decisions without factoring that in their economics. They will continue to ship existing production even if refineries pay less for it, i.e. a spread issue, to take more sulphur out. Mostly a red herring.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by 2 yen »

Detailed and interesting response. I always take Motley Fool with a grain of salt because they appear to use robo-type article writers for some of their pieces. A bit of data is fed into a formulaic short piece and then spat out on a news feed - just to get an article out.

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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by Peculiar_Investor »

2 yen wrote: 07 Jan 2019 11:21 Detailed and interesting response. I always take Motley Fool with a grain of salt because they appear to use robo-type article writers for some of their pieces. A bit of data is fed into a formulaic short piece and then spat out on a news feed - just to get an article out.

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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by AltaRed »

2 yen wrote: 07 Jan 2019 11:21 Detailed and interesting response. I always take Motley Fool with a grain of salt because they appear to use robo-type article writers for some of their pieces. A bit of data is fed into a formulaic short piece and then spat out on a news feed - just to get an article out.

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As usual, some individual focuses on a singular issue and not the full meal deal. IPL is trading lower for a number of reasons, i.e. overall market malaise as well as the noted near term earnings (and thus dividend) vulnerabilities.

The singular big question mark I have right now is the wisdom in recently increasing their dividend https://mma.prnewswire.com/media/782087 ... p=original I know they did it to keep their record of dividend increases intact and it is only 3 cents/year.... but not the brightest decision in my mind while they are spending money on their petro-chemical project.
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Re: Inter Pipeline Ltd (Symbol-IPL) (formerly IPL.UN)

Post by 2 yen »

Peculiar_Investor wrote: 07 Jan 2019 11:24
2 yen wrote: 07 Jan 2019 11:21 Detailed and interesting response. I always take Motley Fool with a grain of salt because they appear to use robo-type article writers for some of their pieces. A bit of data is fed into a formulaic short piece and then spat out on a news feed - just to get an article out.

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Particular for analysis of oil and gas, and related industries, I'd take AltaRed over Motley Fool each and every time.
+1. :thumbsup:

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