Genesis Energy Is A 'Slow Moving Train Wreck'

10/13/17 12:41PM EDT

Genesis Energy Is A 'Slow Moving Train Wreck' - oil image11111

Genesis Energy (GEL) announced a 31% distribution cut yesterday, from an annualized rate of $2.89/unit to $2.00/unit. The stock fell as much as -4.6% on the news. Energy analyst Kevin Kaiser has long been a bear on the stock, issuing his original short call on October 12, 2015. Shares are down over approximately 40% since then.

This call is not over. Kaiser says Genesis Energy (GEL) still has 50% downside.

"In our view, the new distribution is still long-term unsustainable given GEL only generates earnings and free cash flow of ~$1.00/unit," Kaiser wrote yesterday. "Any way you slice it, GEL is massively levered, and $110MM of annual distribution savings only reduces the Company’s leverage metrics by ~0.2x p.a."

Kaiser's short thesis remains that Genesis' "high valuation, super-aggressive non-GAAP accounting, high leverage, and low quality asset base and management team" justified selling the shares.

"GEL is a slow-moving train wreck," he wrote in June.

Here are the key takeaways from Kaiser's call back in October 2015.

Genesis Energy Is A 'Slow Moving Train Wreck' - gel1

Genesis Energy Is A 'Slow Moving Train Wreck' - investing ideas

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