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Non-Tech : UAN - The variable distribution MLP that could go a long way
UAN 80.00+1.3%9:52 AM EST

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From: Elroy10/19/2021 10:48:05 AM
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Area51

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UAN has announced the Q3 earnings date as Nov 1st after the close. They'll announce results and declare the variable distribution earned in Q3, payable about two weeks later.

I wonder what expectations for Q3 are in the stock? Fertilizer prices have shot up so much in the last month that it almost seems like Q3 doesn't matter, the big distributions remain on the horizon.

My guess is they sold UAN fertilizer for about $300/ton in Q3, and ammonia for about $550/ton, and that will result in a distribution of about $4.00, with a bias to the upside.

For charges positive and negative.....I'd expect

$5 reversal of turnaround charges taken in Q1 and Q2. The turnaround was planned for Q4 2021, but has been pushed back to Q3 2022 due to Covid.

$15 charge for already announced 9.25% debt repurchased in Q3. This repurchase counts against distributable cash flows.

So I expect net charges of $10m.

My back of the envelope distribution calculation says that in Q2 2021 they sold UAN fertilizer for $237/ton and distributed $1.72 with about $2.50 in "one time" charges. So in a clean quarter and with UAN priced at $237/ton they could distribute about $4.00.

With $10m in charges and UAN fertilizer priced at $300 they could (I think) distribute up to $6.50 in Q3. Another back of the envelope calculation I did previously indicated every $20 in UAN price increase can result in $1.00 per share per quarter in distributions. I'd rather have conservative expectations, and costs can increase and other new charges can enter (and exit) any time, so I'm expecting about $4.00 in distributions, but a higher number (if my expected $300 realized price per ton of UAN fertilizer is correct) would not really surprise me.

I also wonder, if they declare a $4.00 distributions, do the units move higher, lower, go nowhere, or what? Hard to say, but I'd expect a $82 stock on a $16 per year run rate in distributions, with a good chance that the run rate is likely to increase (since future UAN price per ton in around $550) would ...... go up?
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