After the close, Oxford put out a press release reaffirming that it expects to continue to pay the minimum quarterly distribution to its common unitholders.
“Oxford expects to pay its minimum quarterly distribution of $0.4375 per unit to its common unitholders throughout 2012 with the first quarter 2012 distribution expected to occur on May 15.”
The Company is “evaluating the future payment of the distribution on its Subordinated Units” so I would expect them to suspend those distributions until their cash flow recovers enough to cover the full distribution. They also mention that they are confident in the outlook for 2012 which will largely be driven by the strength of their core NAPP (Northern Appalachian) business and the benefits from their ILB (Illinois Basin) restructuring initiatives. It also sounds like the first quarter results will still be weak based on their statement that they believe “the first quarter of 2012 financial results will not be representative of the results expected for the remainder of 2012.”
In the last Weekly Snapshot OXF’s common unit quarterly distribution was projected at a cut to $0.20 and a further negative growth rate so their 3 Year Forward Yield After Tax (3YR FYAT) was at 20.8%. If the Common Unit Distribution is held flat at $0.4375 the 3YR FYAT jumps way up to 65.5% (based on last Friday’s closing price of $7.31). I expect that the units will gap up at the open tomorrow and the units that I laddered into two weeks ago at $8, $7.50 and $7 will look pretty good, still a long way to go to get the full position back to break even but now it should be moving in the right direction plus the maintained distribution.
Assuming flat common unit distributions at $0.4375 per quarter here are the estimated 3YR FYAT’s at various OXF unit prices:
- $8.00 – 59.9%
- $8.50 – 56.4%
- $9.00 – 53.2%
- $9.50 – 50.4%
- $10.00 – 47.9%
- $10.50 – 45.6%
- $11.00 – 43.6%
- $12.00 – 39.9%
- $13.00 – 36.9%
OXF is EXTREMELY RISKY but I will look to add a little more to my position (my total invested capital in OXF is still under 1% of total assets). I put an after hours order in to add at $9.00, should have been quicker and might have picked some up earlier right when I read the press release and had information asymmetry…
Here’s a link to the Press Release: http://ir.oxfordresources.com/phoenix.zhtml?c=235713&p=irol-newsArticle&ID=1675160&highlight=
UPDATE AS OF MAY 18, 2012: After reviewing the first quarter financial statements I fully exited the OXF position on May 18 for a net loss of around 43% (roughly 0.5% of my AUM). Given the first quarter having zero distributable cash flow I am going to wait and see if they can turn the performance around before contemplating adding back any OXF exposure. Hindsight being 20/20 it clearly would have been better to fully exit the position into the price surge that was triggered by the press release above.