KMI - On the road to disaster?

[Running_Man]

One of the highlights of last year for me was the buyout of my Kinder Morgan Partnership KMP. Now when I look at KMI which is the surviving entity if you took the shares, which I did not. Looking at their balance sheet I see major headaches for them. Value Line on June 5th lowered the safety rating on KMI from 2 to 3 which is very unusual and a warning sign to immediately sell if I did own KMI. KMI has done very well in the zero interest rate environment as they have used debt to expand and pay generous distributions to their shareholders.

They appear totally dependent on being able to borrow large sums of money to maintain their model. They are paying out $1.92 in dividends yet only earning $1.00 per share. Their Capital Spending plan is $1.80 per share which is about $0.80 per share higher than depreciation, meaning just to pay dividend and capital spending plan they need to borrow, or issue new shares for $1.72 per share, nearly 2 Billion dollars. This for a company with revenues of $6.95 per share. 54% of sales for dividends and expansion for a company with the amount of debt already incurred is not sustainable. A 2 percent increase in interest rates would mean a 50% increase in interest expense for a company with 12 billion in long term debt needing to be rolled in the next 5 years.

Right now KMI already has debt of $20.00 per share or 41 Billion dollars, which is twice the dollar level of debt of Exxon Mobil which has sales of $65 per share. Exxon Mobil debt is $5.00 per share. Chevron's debt is $16.67 per share at 31.5 Billion. The day the capital markets dry up for KMI for additional debt, is the day they will be forced to cut the dividend more than in 1/2.

The stock has fallen to $33 but this stock could easily fall below $20. The bull case implies the ability to borrow in the coming years a couple billion a year at present low interest rates, not an investment I would advocate.

This quick look I did at KMI because I wanted to see if I was interested in the new entity did show me how financially strong Exxon Mobil is, at 73 it will be yielding 4 percent and the risk of a dividend cut in the next 2 years is very low. That would continue to be the oil play I would recommend, assuming Exxon gets to that price point.

 

[Running_Man]

3 Month update:

KMI has announced that they no longer can plan for 10% annual growth in dividend and looking for 6-10 percent for next year. Price today closed at 26.6 down 23 percent from original post and getting close to the target of 20. The non GAAP statistic of distributable Cash Flow should be ignored!!! look at GAAP and adjust yourself if needed to see what they are doing and if you want to invest in the company. Here is a link to their 9 months and quarterly earnings and balance sheet of 2015. With 2.173 billion average shares and $1.05 in dividends not covered by earnings ($1.48 -$0.43) you get a shortfall of $2.281 billion dollars. Add back the non cash write-off of assets for impairment of value of 489 million and you have $1.783 Billion in cash needed for dividends, which just happens to be the amount of debt they have added since 12/31/2014. This is a bit of an oversimplification but needed for this post to not become an accounting analysis.

So the 2 billion a year in additional debt to maintain the dividend appears to be the plan. For this plan to work in the long term the business would need to take off in profitability in order to cover the debt being added. Growing the debt at 5 percent per year increases the risk of this company with every year they continue to do this as earnings are falling and not rising. Wait for $20 if you really truly feel you want to invest in KMI

http://ir.kindermorgan.com/sites/kindermorgan.investorhq.businesswire.com/files/report/file/KMI_Q3_2015_.pdf

Exxon Mobil price did fall below 73 and is up 16.8 percent from that 73 to 85.29 today and that was obtainable as XOM fell to 68 and if you had paid the price of XOM when I posted this (78) you would be still up about 8 percent and XOM would still be my preference today although I always find planning for stock prices advantageous for minimizing risk in the long run. The advantage of waiting for Exxon@ 73 instead of buying KMI @ 33 is that today you would have an investment 40% !! greater in value with Exxon than one with KMI, prices matter

 

[alaska55]

Cherry picking dates also helps. how about if I bought KMI sept 29.

 

[Running_Man]

Cherry picking dates also helps. how about if I bought KMI sept 29.

Well since I gave price and date and expected price I hardly think I can be accused of cherry picking, but if you cherry picked Sept 29 you'd be up 1.8 percent, 15 percent behind XOM @73. But you would also be at risk of about a further decline of 25 percent in the coming months I think. I don't think I'd want one of your cherry pies, your cherry's are a bit sour for my taste.


https://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1446519045193&chddm=9369&chls=IntervalBasedLine&cmpto=NYSE:XOM&cmptdms=0&q=NYSE:KMI&ntsp=0&ei=1CA4Vvm2NInFjAGe0YvgAQ

 

[aja8888]

I loaded up on XOM at $72 and still have 100 shares of KMI left to sell which cost $31. Maybe I'll dump the KMI at market price and use the cash for Chevron.

Or maybe I'll just sit on the cash until the next time XOM goes to $70.

There is just too much crude oil above ground to feel good here. I was on a gas asset sale recently and those assets probably won't find buyers. I was shocked at seeing about 75 Marcellus wells shut in and they cost about $10 Mil each to drill and frac. No gas customers....what the heck were they thinking when they drilled those big wells?

 

[hesperus]

There was an article in Barrons last february about KMP (before the transition), that drew attention to the partnership's model for distributable cash flow (DCF). Kinder Morgan's expansion capital is almost entirely financed with new debt and equity from the MLP, making it vulnerable to higher interest rates and dislocations in the capital markets. That may be true about many MLP's, but KMP was apparently highly leveraged. Makes me wonder if the transition out of partnerships bought them some time and accounting cover, but is still an unsustainable model in the current environment. There are certainly enough questions being raised about KMI over the last year to give one some trepidation about investments there.

 

[MooreBonds]

The non GAAP statistic of distributable Cash Flow should be ignored!!!

....which most REITs and MLPs use as a standard metric, and most investors and industry professionals also use as a standard reference for evaluating REITs and MLPs.

With 2.173 billion average shares and $1.05 in dividends not covered by earnings ($1.48 -$0.43) you get a shortfall of $2.281 billion dollars. Add back the non cash write-off of assets for impairment of value of 489 million and you have $1.783 Billion in cash needed for dividends, which just happens to be the amount of debt they have added since 12/31/2014.

....and which also just happens to be just about exactly what they had in depreciation expenses ($1.725 B).

So the 2 billion a year in additional debt to maintain the dividend appears to be the plan. For this plan to work in the long term the business would need to take off in profitability in order to cover the debt being added. Growing the debt at 5 percent per year increases the risk of this company with every year they continue to do this as earnings are falling and not rising. Wait for $20 if you really truly feel you want to invest in KMI

So I guess all of those projects they are in the middle of constructing, and the various other planned/future projects they talk about in their quarterly release are all financed by the money tree in Richard Kinder's back yard, and don't need any cash from KMI to pay everyone? They are completely unrelated to KMI's debt? I guess every time a REIT issues debt or takes out financing, it's just to send it out to shareholders, and has nothing to do with acquiring a property or another REIT.

Is KMI effected by low energy prices? Yes. Am I a little nervous with the market gyrations in my KMI holdings? Yes. But do I think it's some house of cards that is only sustained by issuing more debt that is magically turned right around and sent out the door to shareholders through some elaborate shell game? I guess if one thinks every REIT is a scheme that is about to fall apart because GAAP earnings isn't anywhere close to the dividend, then I guess KMI wouldn't make sense, either.

 

[Running_Man]

....which most REITs and MLPs use as a standard metric, and most investors and industry professionals also use as a standard reference for evaluating REITs and MLPs.



....and which also just happens to be just about exactly what they had in depreciation expenses ($1.725 B).


Of course KMI is not a REIT nor an MLP, it is a C corp and pays taxes. The logic behind this change given by Kinder was that in order to take advantage of the boom in oil prices and natural gas it needed to not pay out all profits as MLP in order to fund capital projects for the great growth opportunities available. Budget for 2015 was for $70 WTI


So I guess all of those projects they are in the middle of constructing, and the various other planned/future projects they talk about in their quarterly release are all financed by the money tree in Richard Kinder's back yard, and don't need any cash from KMI to pay everyone? They are completely unrelated to KMI's debt? I guess every time a REIT issues debt or takes out financing, it's just to send it out to shareholders, and has nothing to do with acquiring a property or another REIT.

Is KMI effected by low energy prices? Yes. Am I a little nervous with the market gyrations in my KMI holdings? Yes. But do I think it's some house of cards that is only sustained by issuing more debt that is magically turned right around and sent out the door to shareholders through some elaborate shell game? I guess if one thinks every REIT is a scheme that is about to fall apart because GAAP earnings isn't anywhere close to the dividend, then I guess KMI wouldn't make sense, either.

Well you can look at the debt in one of two ways, either KMI is paying out all their earnings and additionally all available cash for dividends, leaving none for investing in their future and requiring borrowings, or they have no cash for dividends and borrow to make shareholders feel company has value. As most companies and particularly energy companies need investments to survive I do not expect a company to depend on borrowing for basic cap-ex after it is established as third largest company in it's field. Exxon mobil could easily borrow another $4.50 per share and increase the dividend to $7.50, would that make them a better investment?
Of course offsetting the 2 billion in new investments KMI made in 2015 KMI wrote off 500 million so far this year in prior year investments that weren't worth what they spent, forget about actually bringing additional corporate value or about 25% of current year investments. . As for the Richard Kinder money tree, I believe he realized he had picked all that fruit off his money tree a couple of years ago and he is merely playing 3 card monte with the remains of Kinder Morgan partnership, El Paso Pipeline Partners and the old KMI and hoped for a continued oil boom to restart the game. So far his game is borrow today tomorrow will be a better day.

 

[alaska55]

Kinder Morgan: Lies, Damned Lies, And Statistics - Kinder Morgan, Inc. (NYSE:KMI) | Seeking Alpha


This guy explains it a lot better than I could. Yes they are a c-corp but they are still run like a MLP in as they have tax write offs for years in the future. If you don't understand how they operate that's fine don't buy. If oil prices don't go to 60+ I wouldn't own Exxon or KMI much longer. By the way I own both XOM and KMI.

 

[alaska55]

Another Nat Gas KMI Story

The future of Kinder Morgan = NAT GAS

4 Things Kinder Morgan Inc. Wants You to Know About the Natural Gas Story -- The Motley Fool

 

[Running_Man]

Based on my simple assessment of reliability of the company's distributable cash flow, dividend yield, dividend growth, organic growth prospects and risk factors, I put the fair value of shares at $37

The idea that KMI is being run as an MLP is absurd. It is being requested to be valued as an MLP but it is not one, MLP's pass on their depreciation and expenses to the unit holders to lessen paying taxes on distributions , C-Corps take depreciation as deduction from income. To state that we have a great new tax advantage in taking depreciation expense and that upon joining the companies together we are able to reduce the useful life of the assets increasing depreciation and "shocker" write off other assets yearly as not having value stated is not not not not not a reason to buy a stock.

Then add as a deduction from cash only "Sustaining Capital Projects" which is totally a management judgement call. Example: you replace a failing pipeline that needs to be replaced with a larger pipeline that will be able to handle growth planned for the next 10 years, which may or may not be realized is that sustaining capital because the pipeline was absolutely needed for present sales or growth because you spent more than needed for future growth capabilities, in most cases as these pipelines fail they are not sustaining capital. For 6 months ending 6/30/15 KMI spent 3.8 billion dollars on acquisitions and capital projects yet only 245 million of that amount is sustaining capital to maintain assets on a 40 billion dollar asset base? 1.4% of your asset basis annually is being sustaining? that implies a useful life on those assets of 70 years. Sustaining capital project expense and by connection distributable cash flow is the worst most useless statistic in the history of accounting.

What KMI has been doing is the same thing Valeant has been doing, keep borrowing growing and issuing and you can bury the lack of current profitability under reams of corporate financial measures designed for explaining growth they will supply you. Or perhaps Enterprise adjusted Ebitda for cost savings which are not yet obtained but are sure to be in the future and added to EBITDA is actually a good measure, I don't know but I know I would never invest that way.

 

[Running_Man]

The future of Kinder Morgan = NAT GAS

4 Things Kinder Morgan Inc. Wants You to Know About the Natural Gas Story -- The Motley Fool

Should this natural gas boom occur as the bull case is stating it would be a big positive for KMI. The great boom in the petrochemical area is of course due to ZIRP and how many of them will come to fruition is the question but I would not want to hazard a guess here. I will point out it was only 2 years ago that Richard Kinder said that the shale oil boom would enable KMI to maintain at least a 10 percent per year dividend increase that they not have reduced to 6 percent due to declines in oil volumes. KMI of course needs a higher stock price for when they issue shares for these projects, it is a currency to use in place of debt if they can get investors to value the company high enough.

I think almost all of these benefits are offset by interest rate risk on the large debt, and any debt rating cut back stops the growth wheel that exposes the lower profitability of KMI than what the projections offer. At 25 today it is getting pretty close to the 20 I think it will fall to, but I think it will underperform in a recovery as well and I have grave doubts about the sustainability of dividend above 20 cents per quarter long term. Which is where at a price of 20 dollars you would get the 4 percent yield on the value of the dividend potential of the operation before debt mechanisms and stock offerings.

 

[Running_Man]

And so today nearly 6 months after Value Line downgraded the safety rating of Kinder Morgan, Moody's today said KMI is on watch for a possible downgrade to junk status on 44 billion in bonds. This resulted in the stock drop today.... and at 22.5 it is actually down 10% in one month since my previous post, showing that outsized losses are still very possible even on very beaten down stocks.

 

[Mulligan]

And so today nearly 6 months after Value Line downgraded the safety rating of Kinder Morgan, Moody's today said KMI is on watch for a possible downgrade to junk status on 44 billion in bonds. This resulted in the stock drop today....

If I listened to everyone on the income forums that were all honking KMI's horn, I would have a very light wallet now. I am all about high dividends as that is all I own in preferreds, but I could never catch the KMI fever. And I am glad I didn't.


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[Mulligan]

Runningman, have you seen KMI's continued sinking? Keeps taking on more water down 6% this morning alone.


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[Running_Man]

Runningman, have you seen KMI's continued sinking? Keeps taking on more water down 6% this morning alone.


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Yes I did and this morning it has broken below $20.00 which is what I thought would happen when I originally started this thread. Avoiding stocks with major drops is critical when investing in individual stocks. When investing in income stocks it is important to avoid the overhyped in trouble companies. Value Lines safety rating frequently offers good value on early warning when a stock drops in safety in their rating as KMI did for 2 reasons:

1) The drop in rating is based strictly an objective mathematical criteria and not subject to objective judgements of analyst to adjust.

2) Value Line's safety ratings are not followed by very many and hence offers a good objective actionable change in the outlook for a company. Usually the safety rating drops happen to companies whose stock has already fallen some,as KMI had dropped to $40.40 at the point of the drop in rating from 44.40 a 10 percent decline but allowed one to avoid a much larger drop. It is key to then with the drop in safety to look with a critical eye of what the company is doing before buying back in.

At this point what is in KMI's price of 20? I think the following:

a) KMI needs 2-3 billion of borrowing if it is to keep dividend where it is as well as refinance 11 billion of debt coming due in next five years. This means about 20 billion to finance over the next 5 years.

b) If KMI intends to stay on their stated plan rating will be junk adding 1% to their interest rates most likely over the next 5 years, this means 200 million less in profits or 10 cents per share, an additional increase of 1 percent rise in interest rates cuts another 10 cents per share and also portends a cycle of increasing interest rate expense as we move forward through those 5 years. This will mean further downgrades as their leverage continues an upward trajectory unless their is a dramatic recovery in natural gas and oil.

c) Richard Kinder I am sure is aware of the issues and therefore it is far more likely that the dividend will be slashed to maintain the credit rating and they will agree the company as no longer an MLP, so called "distributable cash flow" as a measure will be dropped and actual cash flows will become the focus again. So a cut in the dividend to 20 cents per share per quarter saving 2.5 billion dollars is the most likely outcome. A cut to 10-15 cents per share would allow more financing wiggle room and is not out of the possibility of outcomes, this would mean a stock drop below 15.

d) I am not buying KMI but if I were based on the thought this is a valuable business I would be targeting 15 dollars per share at this point hoping for a rapid decline with year end tax loss selling. I think it is very unlikely KMI will go out of business but not entirely impossible either if economic conditions were to worsen. The more the stock drops the easier it is going to be for KMI to cut their dividend as it would have been priced in. At this point the board is probably worried about legal issues as they indicated for growth not cuts in the dividend. But if they do not cut their dividend then either the energy complex is exploding upwards or else the rating agencies will cut the KMI ratings and do the dirty work for them as capital markets will dry up for KMI.

e) The other possibility is sales of properties into the market at fire sales prices but that would no doubt involve "non-cash" losses on disposal. But that just continues to erode the balance sheet and seems a worse move to make in my opinion.

 

[Mulligan]

I am all about income investing. I kicked the tires a few months ago because the enticing yield. I also thought about an mutual fund basket of them, but who is to say many more in the basket are facing the exact same
problems? I cannot research in depth to figure that out. I will just stay in my preferred stocks for income as the ones I invest in are very easy to predict. I just do not have the stomach to gamble when I don't quite understand the known unknowns.


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[Running_Man]

KMI today announced

Oil and gas pipeline and infrastructure company Kinder Morgan Inc. (NYSE: KMI) said Friday that, after completing its 2016 budget process, it can confirm the company’s previous estimate for 6% to 10% dividend growth over its $2.00 per share target for 2015. The company said that its calculations indicate that Kinder Morgan will generate distributable cash flow of “slightly over” $5 billion in 2016.

Also in the coming days they will be reviewing their dividend policy with a goal of maintaining an investment grade credit rating. On this news the stock has fallen to about $17 per share. Fair value to me on a maintainable dividend annual basis of $0.60 to $0.80 per year is somewhere in the $10- $20 range depending on the growth outlook, valuing my expected maintainable dividend between 4-6% yield on the stock price. This would also place the PE of the company somewhere between 10 and 20 times earning depending on the following years volatility but I would expect earnings of $0.80 next year so at PE -18 you get $14.40 per share. So at about $15.00 per share you probably are picking up a fairly valued company with a 5 percent annual dividend.

See with accounting you can only mess with valuation criteria as long as people are willing to lend you billions at 3 per cent interest. At 10 per cent interest plans aren't quite as viable

 

[StuckinCT]

I have done extensive research on the MLP model and there is a big debate on free cash flow and distributable cash flow, which is net of cap ex. KMI though a corporation has MLP traits. The market does not know how to value MLPs, or corporations such as KMI. I had a 1% allocation in MLPs, took that to 2% in July and now 3% as of yesterday. I like MLPFX, Oppenheimer, but overlayed that with AMLP yesterday so I can trade it intraday. I own a tiny bit of KMI, some WMB, and SE in my 3% weighting. Still have a profit on WMB! The better names in midstream will not only be able to maintain their distributions, but increase them. I read the quarterly commentary after the close today from the Goldman MLP & infrastructure fund and though there is a greater dispersion in projected distribution rates from GPs, the confidence in the overall rate of increase is still there. Bottom line, MLPs and corporate entities like KMI are priced as if their business model is unsustainable and the reality is there is misinformation in the market place about coverage ratios as they relate to free cash flow/ distributable cash flow. There was a prominent article in September that MLPs with less than a 1 coverage ratio would need additional capital to maintain distributions. This is misinformation. The coverage ratios include capex, so MLPs can have less than a 1 ratio, and still be in excellent shape to maintain and even increase distributions without any capital market infusions. After the tax loss selling and margin induced selling abates, quality midstream MLPs and I suspect KMI will continue their distributions, and even increase them. When the market understands this, there will be a violent snap back rally. I can't think of a asset as mispriced as MLPs are today in my twenty five years on Wall Street. If you don't own MLPs, this is a golden opportunity as the price of oil has little to do with their ability to pay distributions in the midstream space.

 

[Mulligan]

Stuck, A sincere question not a snarky one, as I am following this issue with interest, but am not qualified enough to dig deep into the financials, and only parrot what I read which seems heated on both sides....
If the company is so sound financially why does it have to tap the preferred market with a gaudy 9.75% yield? I know companies do not like giving money away and that yield is way past preferreds issued from totally junk crap companies. Why wouldn't they borrow through the bond market at a cheaper yield? Is the reason because they are tapped out in that arena? Bank loan covenant restrictions?
It appears to me from my very limited abilities that the market does know something, in relation to the current energy market environment.


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[StuckinCT]

I was commenting more on the mid streams in general, but I suspect KMI will be able to maintain the dividend, though they did not raise it meaningfully at the last meeting. I also think they were caught with their pants down buying out KMP and this other distressed pipeline, assumed a lot of debt and probably overestimated capital markets willingness to provide financing. Bottom line, KMI cash flow from operations will not change much as a midstream player and though they may be capital starved at the moment, their assets and cash flow is so strong that when capital markets reopen, they'll be just fine. I don't own much of it, and my opinion is on the overall midstream space. In sum, people are confused about coverage ratios and assume they'll never be able to borrow again, that's just plain silly on both accounts.

 

[Mulligan]

Usually a poor investment for one, at some point can become a great investment for another, barring bankruptcy. This interests me a lot for some reason, and I know its been painful for investors. The simpleton in still says something is wrong...Alcoa far from the bastion of financial strength with same bond debt rating as KMI also has a preferred convertible and it yields 8.5%. KMI-A is now butting up on an astronomical 14%. Compare those to conservative Dominion Resources with a convertible yielding 5.65%. It just appears that the risk level is very high... But that may just be me as I am basically Mr. Baa3 and that is at the preferred level, not note level.


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[StuckinCT]

Yes, they are levered, quick ratio .5. Bad timing. KMI is .1% of my portfolio and I don't intend to buy any more. I think high quality midstream MLPs on the other hand look unbelievably underpriced. Many of them can fund their distributions and capex as well as distribution growth out of cash flow for many years. In other words, they don't need to tap capital markets which is the MLP model. This is in the midstream space only. Upstream is a completely different story. People are selling first and asking questions later which is usually the case but when the dust settles they will realize their reason for selling was wrong, at least for midstream MLPs. I can't think of a time when the market got it so wrong...

On a separate note, Kinder's comments on its budgeting, equity funding and dividend for 2016 today only said that they are not looking to issue stock as they have less expensive alternatives. I read the comment that perhaps they will be able to fund everything from cash flow. A citi analyst assumed this opened the door to a dividend cut. I think that is a bit too early to conclude this since only a month or so ago they were committed to 6 to 10% dividend growth, and they could fund projects by only raising it slightly or keeping it steady. I mean a 5% delta on its cash flow is $250,0000,0000!

 

[Running_Man]

I am not sure what your cash flow number is that you are claiming for KMI but almost certainly they are cutting the dividend. I assume you put 2 too many zero's in there. 250 million in cash is trivial to KMI. The dividend is nearly 5 billion dollars and they have 20 billion they need for capital spending over the intermediate term. They stated they would do what it takes to maintain investment rating and not issue equity, by definition they cannot borrow or their leverage will be too high and result in a rating downgrade so they are certainly either cutting capital project (impossible as it would expose prior bad investments) or they are cutting dividend. So it is almost certain to me that they will cut dividend to between $0.80 - $1.60 annually.

An interesting play on KMI is coming into play with the preferred issue which almost certainly will have the dividend paid on the preferred and will convert to stock in 3 years. I am trying to determine if the preferred has a corridor where the conversion allows $10 to be a low stock price and $100 to be a maximum for conversion. But if the dividend is cut to $1.20 per year then the preferred will outperform the common as long as the stock ends at 30 or lower in 3 years. If there is a $10 minimum redemption value on the preferred then the maximum present value (discounting future dividends by 4%) loss if the preferred pays the dividends is 7.13% over 3 years. And if KMI would recover to 20-25 at the end of 3 years the preferred offers an annual return between 13-20%, if the preferred drops a couple points more its a 15-22% return range.

Update: There is a floor of 9.75 to represent a floor of 35% of the original issue price.

 

[aja8888]

........ so they are certainly either cutting capital project (impossible as it would expose prior bad investments) or they are cutting dividend. So it is almost certain to me that they will cut dividend to between $0.80 - $1.60 annually.

Cutting capital spending is not "impossible" as many companies in the energy industry are doing just that right now. And I have no clue how you can say that if KMI does that, it will "expose prior bad investments" or why that would matter if they did? What's spent is spent and any new projects are open for evaluation prior to funding. Thje capital plan is just that; a plan. Projects that are in process can be shut in/curtailed for future completion, if need be.

Statements like you made lead me to believe you are a numbers type of guy (an accountant/banker?) and not one well versed in the energy business operations and what it takes to provide liquid products at the pump or gas meter. Not that that matters for evaluating a stock, though, and I have enjoyed reading your analysis in threads.

KMI is certainly hurting and so is the entire energy industry. But, there are a lot of smart energy operators out there and most will survive or become part of another similar organization. What surprises me, and I work in the energy business (asset acquisition due diligence), is the never ending stream of loans being made to energy (upstream and downstream) companies that continue to be made (now), even as we face lower oil and gas futures prices. The investment bankers must be the real idiots in this mess.