It's shaping up as another difficult day for Linn Energy (LINE -9.3%) and LinnCo (LNCO -8%)...

It's shaping up as another difficult day for Linn Energy (LINE -9.3%) and LinnCo (LNCO -8%) after yesterday's selloff. After a round of downgrades, Stifel Nicolaus today cut its price target on both to $33 from $48. Selling the put portfolio would not be a wise option, the firm says; Linn would shed some controversy but sacrifice possible future cash flow. Baird cautions broadly on upstream MLPs; BBEP -9%, ARP -7.1%, VNR -6.3%, QRE -6.2%, EVEP -3.2%.

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Comments (14)
  • smurf
    , contributor
    Comments (6139) | Send Message


    Forgot something very important recently. Don't travel with the lemmings. Good, but expensive reminder lesson.
    3 Jul 2013, 10:54 AM Reply Like
  • Richard S. Daskin CFA, CFP(R)
    , contributor
    Comments (351) | Send Message
    Looks eerily similar to the sell off in REITs recently.
    3 Jul 2013, 11:03 AM Reply Like
  • paul7777777
    , contributor
    Comments (72) | Send Message
    Buying opportunity, oil price is rising because of the problems in Egypt, so energystocks will profit from that.
    3 Jul 2013, 11:12 AM Reply Like
  • gl2238
    , contributor
    Comments (9) | Send Message
    Another manipulation like ERF was a year or so ago. Big boys control the marker much like the precious metals. Ever figure why the central banks globally are buying Gold and Silver in droves? Yup the price is being driven down so they can accumulate at bargain prices.
    3 Jul 2013, 11:14 AM Reply Like
  • sinedo
    , contributor
    Comments (501) | Send Message
    Ancient thinking, gl2238; computer programs control the market, not Big Boys. Once a trend, however small, begins the computer programs jump on it, and there are a lot of trading programs that can each trade in and out of a stock, five or more times a second. One program reinforces the next and the trend is magnified.
    3 Jul 2013, 10:59 PM Reply Like
  • Hammer1
    , contributor
    Comments (54) | Send Message
    Can we please focus on the basics and see if anything has changed......LINE has a policy of hedging its production out 5 years to smooth out and add predictability to cash flow......right? Isn't booking profits on these hedges when realizations drop in order to maintain distributions what they are supposed to do? Isn't this reduced exposure to oil and gas price fluctuations one of the attractive features of the stock? Isn't sophisticated hedging one of the core competencies of LINE? Doesn't the company have a competent accounting firm certifying their financials? Can't we shelve the hysteria, take a deep breath and not jump to unwarranted conclusions? What am I missing here?
    3 Jul 2013, 12:44 PM Reply Like
  • Jason Burack
    , contributor
    Comments (2147) | Send Message
    Well said Hammer1. I think some very high net worth hedge fund managers got some buddies at the SEC to do an "investigation" that 6 months from now will be cancelled. The shorts make many millions and then cover and go long for pennies.
    3 Jul 2013, 04:10 PM Reply Like
  • Jdeboer87
    , contributor
    Comments (330) | Send Message
    I agree Hammer1, Cash flow is what matter here. How does the method of accounting for hedges effect cash flow?
    3 Jul 2013, 12:54 PM Reply Like
  • sinedo
    , contributor
    Comments (501) | Send Message
    What's the fuss about? Buying and selling Options? Since when is that illegal, or is it prohibited by LINE's charter? Frankly, unless the options are naked, the risk is only the premium, and premiums are what we pay for insurance?
    No explanation for the SEC investigation or the downgrades on the LINE webpage. Can anyone state the worst-case scenario?
    I want to buy more.
    3 Jul 2013, 12:57 PM Reply Like
  • lildimsum7
    , contributor
    Comments (663) | Send Message
    one big problem is the way they define realized gains. they treat realized gains as cash settlements and don't account for the premiums. they amortize the cost of puts over the contract life and enter it to 'unrealized losses on derivatives'. but these unrealized losses aren't accounted for in their adjusted EBITDA, therefore overstating DCF value. basically they view put costs as non-cash charges (comparing it to depreciation of oil and NG - read the 8-K), but does that make sense to you?
    3 Jul 2013, 06:20 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3121) | Send Message
    Energy MLPs have been overbought, driving some of this selloff, LINE notwithstanding.
    3 Jul 2013, 01:00 PM Reply Like
  • Jason Burack
    , contributor
    Comments (2147) | Send Message
    Linn's asset base is declining quite rapidly without the Berry Petroleum acquisition. They need to add accretive oil production and more oil reserves from somewhere or their distribution could be cut and there is zero chance of distribution growth.
    3 Jul 2013, 04:46 PM Reply Like
  • rmerrick
    , contributor
    Comments (133) | Send Message
    If I were short LINE, I would be concerned that I might be forced to pay $0.90 each month for each of my short shares. I am not sure if MLP cash distributions are treated exactly the same as dividends for short positions. LINCO shorts if they hold will be paying this cost. I don't know if the new monthly distributions will cause a short squeeze, but this is a possibility.
    3 Jul 2013, 05:34 PM Reply Like
  • deskandchairs
    , contributor
    Comments (75) | Send Message
    You would have been more productive by calling your broker and finding out, rather than posting your musings...
    4 Jul 2013, 04:48 AM Reply Like
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