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Richard Zeits  

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  • EXCO Resources: Can A Restructuring Succeed? [View article]
    A Farmer,

    I believe they made a comment on their secured debt capacity on the call. If I recall correctly, they can. (I would take their word - figuring out what can or cannot be done in the bond world can be quite a task, I have not done the work. You may wish to have a look at the transcript.)
    May 2, 2015. 09:34 PM | 2 Likes Like |Link to Comment
  • EXCO Resources: Can A Restructuring Succeed? [View article]
    RG3015,

    In simplified terms, there are two types of debt - secured (bank debt is typically secured) and unsecured (bonds of higher quality issuers are typically unsecured).

    The indenture of an unsecured bond may allow the issuer to incur additional debt, including secured debt. Therefore, the company can issue a "second mortgage" bond that would be second in line after the "first mortgage" debt in terms of its claim on the company's assets (or certain buckets of assets). However, the "second mortgage" bond would be ahead of unsecured bonds - those would only have the residual claim.

    Obviously, the level of recovery in the event of a default may be vastly different for secured and unsecured debt. The First Mortgages may get full recovery whereas unsecured bondholders may get almost nothing.

    So unsecured bondholders are obviously very unhappy if they are pushed further down in the subordination by large amounts of new secured debt issued in front of them.
    May 2, 2015. 08:46 PM | Likes Like |Link to Comment
  • Linn Energy: Should One Bet The Farm On Commodity Prices? [View article]
    Fracjob,

    That is an excellent point. Even places like the Haynesville (which is a remarkably prolific field that is still early in its development cycle) are struggling to compete with the Marcellus and liquids-rich plays.

    It is absolutely not obvious that when the upcycle in natural gas finally arrives, rigs would return to mature areas. As we all remember, a decade ago, when the U.S. was running out of natural gas, making decent returns in legacy fields was a challenge even at much higher prices.

    Hence, the conclusion - big acquisitions is probably LINN's destiny, as organizational transformation and real austerity may require a DNA change.
    May 2, 2015. 08:18 PM | 2 Likes Like |Link to Comment
  • Linn Energy: Should One Bet The Farm On Commodity Prices? [View article]
    Rlp2451,

    Do you think there is any value loss from letting production decline at a moderate rate? The capital program can be re-accelerated when circumstances change. At the moment, the best available projects are being sold into a weak price environment.

    This is not just a matter of return on investment. The question really is: is debt an issue or is it not an issue. If it is, one cannot "drill itself out" of the leverage problem in the current price environment. Investment will most likely be credit-dilutive.
    May 2, 2015. 06:32 PM | 4 Likes Like |Link to Comment
  • Linn Energy: Should One Bet The Farm On Commodity Prices? [View article]
    Rlp2451,

    Can you imagine the effect if all the discretionary funds (capex, distributions, excess g&a, etc.) could be used for bond repurchases in Q1.
    May 2, 2015. 06:15 PM | Likes Like |Link to Comment
  • Linn Energy: Should One Bet The Farm On Commodity Prices? [View article]
    BoulderBoy,

    I am not sure I would agree that Fed Funds (or any other fixed income type benchmark) is relevant for an Oil & Gas MLP. Upstream assets deplete, which is not the case with government bonds' principal.
    May 2, 2015. 06:11 PM | 5 Likes Like |Link to Comment
  • U.S. Shales - 'Fraclog' And 'Refracs' Are The Overused Terms Of This Earnings Season [View article]
    Well, U.S. stocks of gas and distillates are not that far from "normal" (when looked at on a combine basis), while refiner utilization has been climbing higher and higher (and refining capacity has also been creeping up).

    So if there were issues with competitiveness, you would probably see products stocks high and utilizations drifting lower. Am I right?
    May 2, 2015. 04:42 PM | Likes Like |Link to Comment
  • U.S. Shales - 'Fraclog' And 'Refracs' Are The Overused Terms Of This Earnings Season [View article]
    Aricool,

    I disagree on ref utilization. I will be all utilized. Gasoline and diesel are exportable and U.S. refiners are eating everyone else's lunch.

    Having said that, it only works while WTI is at a discount to Brent. Has not always been the case.
    May 2, 2015. 03:33 PM | Likes Like |Link to Comment
  • U.S. Shales - 'Fraclog' And 'Refracs' Are The Overused Terms Of This Earnings Season [View article]
    Aricool,

    Cushing is ~40% used by owners (mostly transportation heavyweights) for their own needs and ~60% is rented out. There is a sort of physical "spot market" where spare storage can be contracted or subcontracted. The market is set by transportation arb. I am working on an overview of Cushing mechanics, but will have to put it in my newsletter.
    May 2, 2015. 03:11 PM | Likes Like |Link to Comment
  • Linn Energy: Should One Bet The Farm On Commodity Prices? [View article]
    BoulderBoy,

    These are all very good points. However, with regard to "In the meantime we are getting pretty well paid to watch," I see a bit of a logical gap.

    In order to be "paid to watch" one has to own the units. So in order to know what one has really been "paid to watch," one need to know the exit price.

    Let me give you an example. Imagine you instruct your bank to send you a check of $1,000 every month from your account. Do you care if the check is effectively covered by the interest that your deposit generated during the previous month or whether the check was funded from the overdraft credit card attached to your bank account?
    May 2, 2015. 02:46 PM | 8 Likes Like |Link to Comment
  • U.S. Shales - 'Fraclog' And 'Refracs' Are The Overused Terms Of This Earnings Season [View article]
    Aricool,

    It's probably "per month," not per day.

    When thinking about the price of storage and how the pricing is developed, I would think of: who owns it; who rents it and under what structure; what does the phrase "storage costs" mean. Things will quickly fall into their places.
    May 2, 2015. 02:18 PM | Likes Like |Link to Comment
  • EXCO Resources: Can A Restructuring Succeed? [View article]
    FaithKeeper,

    I would add, a significant number of years ago. I would also add that in a fragmented industry, it is important to make a right call on the macros and the cycle.
    May 1, 2015. 03:26 PM | 1 Like Like |Link to Comment
  • EXCO Resources: Can A Restructuring Succeed? [View article]
    Charles,

    SDT is nicely overhedged. :)
    May 1, 2015. 01:54 PM | Likes Like |Link to Comment
  • EXCO Resources: Can A Restructuring Succeed? [View article]
    Rawenergy,

    That was my point.

    I sense intuitively that the resoulution can be, somehow, in a buyout of the undecured debt with a subsequent swap for equity. But technically it would be exceptionally difficult to pull off.
    May 1, 2015. 01:28 PM | 2 Likes Like |Link to Comment
  • EXCO Resources: Can A Restructuring Succeed? [View article]
    Charles,

    I am not sure I get the point on the hedges. I thought their production was only partially hedged.
    May 1, 2015. 01:19 PM | 1 Like Like |Link to Comment
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