Now that the Q is out, I will present my update of the prospects for dcf going forward. The Q income statement numbers are already adjusted for income from operations sold and held for sale, which makes this easier to do. Caveats abound, including basing this on one quarter's numbers, though it seems reasonable to use the most recent information.

Interest needs to be adjusted of course. Q3 interest incurred was $26,555 (on a accrual basis), based on an average interest-bearing debt balance of about $1,174M for the quarter. After the quarter end, another $266M was received in sales proceeds, and I'll assume $250M of that is applied to debt. The ending balance was $1,086M, so that leaves $836M going forward. That would equate to $26,555 / $1.174M X $836M = $18,900.

So, let's give it a whack:

Gross margin - $81,200
Cash expenses - $(45,100)
Pro-forma interest - $(18,900)
Maintenance capex (say) - $(2,500)

Net dcf - $14,700

Per share (49,752) = $.24, or $.96 annually.

Most MLP's do not payout 100% of dcf (coverage at VNR was 1.8!), so let's say 1.1? That would indicate a potential distribution of $.87. There may of course be restrictions in the loan package, mandatory pay downs that would further restrict the use of cash.

What about the refinance? Based on debt of $836M, each point saved would free up $.16 per share. That makes sense in light of previous projections, where a 5% rate was assumed (about LIBOR plus 3.5). A 4 point savings would yield a $1.51 distribution. But, based on management's comment regarding the modest interest rate savings they expect, it looks like a $1 distribution starting around the end of 2010 is a more reasonable expectation.

And, what does that say about the value proposition here? Long term I think their financing will ease up and be more commercially reasonable, but you also have to expect interest rates to tick up in general going forward. It appears that higher distribution rates will be achieved based on business growth and commodity prices, and it's going to take time. Given that, the units priced at $6 do not appear to be grossly undervalued, given the lack of any current distribution.

Please retort, because these numbers are causing me to second guess a long-term hold here. It's been a fine run, but I may take my profits and look for more yield elsewhere.