Monday, December 16, 2013
Ozm compared to Kinder Morgan
With pipelines there are two ways we bring in cash. Spot tariffs on pipelines are higher than contracted rates, though they forsake the reliable cash generation that comes along with contract agreements.
Kinder favors the long term contracts that fuel our steady dividends. Ozm’s incentive distribution is more like selling in the spot market. Both companies have a blend. Kinder's Trans Canada pipe is about 80% contract, 20% spot (Contracts sold to committed shippers is 708,000 barrels per day (bpd), Trans Mountain total will be 890,000 bpd).
Ozm contract fees covers more than cost, but incentive fees supply most of the distribution. That means that Kinder can determine its dividends further out. Ozm has to wait until it is actually earned to know how much it will pay out.
Somehow it seems like OZ is out of touch with what Investors want. He thinks if he shows a record of incentive payouts, that Investors will pay for the unearned, uncontracted, evaporatable income payments at greater multiples in the share price. He must think its like a credit card report that gives you more points for a longer payment history.
Insider buying is a clue that both look undervalued from the inside.