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Bryce_in_TX

Bryce_in_TX
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  • LinnCo slashed by Baird [View news story]
    Yeah, and the couple of billion will pay the debt down from $12 billion to $10. I have doubts that would be sufficient where the price of oil is at and where it is headed. LINE has too much leverage.
    Dec 16, 2014. 10:18 AM | Likes Like |Link to Comment
  • The Future Of Microsoft: Windows 10 Goes Both Ways [View article]
    I like WIN 7. But looks like my next laptop will be a Mac. Not buying the new MSFT crud.
    Dec 16, 2014. 10:03 AM | 1 Like Like |Link to Comment
  • LinnCo slashed by Baird [View news story]
    I recall Thornburg Mortgage (TMA) was predicated on loaning jumbo mortgages to the most credit worthy people, people whose annual incomes were north of $300K. When real estate turned south, TMA didn't have the capital to pay the cash that the banks were demanding. I wonder if LINE is in a similar situation? Will its creditors require payment of a portion of the debt? And, if so, will LINE have the cash?
    Dec 16, 2014. 09:36 AM | Likes Like |Link to Comment
  • Will Linn Energy Post A Windfall Profit For Q4? [View article]
    Land,

    I am saying the cost of the derivatives are not counted as a cost in the DCF calc. They count the revenues from the derivatives, but not the costs. They budget maintenance cap ex for PP&E, which replaces GAAP depreciation as a cost of the PP&E, but they don't budget anything for the Premiums as a cost.
    Dec 15, 2014. 06:25 PM | 1 Like Like |Link to Comment
  • The Future Of Microsoft: Windows 10 Goes Both Ways [View article]
    Will probably switch to Apple for my next laptop. Don't like the direction Microsoft is heading.
    Dec 15, 2014. 04:37 PM | 1 Like Like |Link to Comment
  • Will Linn Energy Post A Windfall Profit For Q4? [View article]
    Yes, Tim, they pay cash for them, which is deducted from cash to determine cash flow from operations on the GAAP cash flow statement. But in calculating their DCF, the cost of the options is added back to cash. See the 2013 10-K, page 64, the table there, and 2012 specifically.
    Dec 15, 2014. 10:03 AM | Likes Like |Link to Comment
  • Will Linn Energy Post A Windfall Profit For Q4? [View article]
    Go to the 2013 10-K, page 64. That is their calculation of DCF. See 2012. They start with cash flow from operations. The $583 million of derivatives purchased that year are deducted from cash to determine the $350.907 cash flow from operating activities. But, they add it back to determine DCF in the table on page 64 of the 2013 10-K. Derivative premiums do not factor into the DCF calc.

    http://bit.ly/13qqlOc;FormatFilter=
    Dec 15, 2014. 09:58 AM | Likes Like |Link to Comment
  • Will Linn Energy Post A Windfall Profit For Q4? [View article]
    No, the put premiums do not figure in the DCF calculation. That is what I have argued since almost day one, that the premiums should be included in the DCF calculation.
    Dec 15, 2014. 09:45 AM | Likes Like |Link to Comment
  • Will Linn Energy Post A Windfall Profit For Q4? [View article]
    rlp2451,

    What you quote, the non-cash changes in the fair value of derivatives applies only to the derivatives that remain outstanding at the end of the period. It does not apply to the derivatives that settled or matured during the period. There are realized gains and losses on derivatives (derivatives that settle during the period) and unrealized gains and losses on derivatives (derivatives which remain open contracts at the end of a period). The settled derivatives are settled for cash, helping to offset the lower oil prices during a time like now. They definitely are included in cash flow and help "mitigate the risks associated with commodity price volatility and to help maintain cash flows for operating activities, acquisitions, capital expenditures and distributions". Derivatives that settle during the accounting period impact DCF through Net Income or Loss, are received in cash, and increase cash flow from operating activities through GAAP Net Income or Loss. These realized gains or losses are not backed out of the cash flow statement. Derivatives outstanding at the end of the period are marked to market and their FMV is adjusted as a gain or loss for the period in Net Income or Loss, however it is these derivatives which are backed out of the cash flow statement to determine cash flow from operations.

    Realized gains or losses (cash received or paid out) and unrealized gains or losses (non-cash changes in fair value of derivatives) are netted together and reported as one number on the GAAP Income Statement.

    That is my understanding of how it works.
    Dec 15, 2014. 09:40 AM | 1 Like Like |Link to Comment
  • Linn Energy Suffers Another Blow [View article]
    I think Harold Hamm made a very risky bet that is costing him and his shareholders dearly at the moment. Right now he is having to dip into the gains realized on monetizing the derivatives in order to cover operating expenses. HE would have done better, IMO to have left the derivatives in place. He sold them when oil was at about $80 a barrel. Now it's below $60. That $20 or better variance would have paid him a lot more when the derivatives settled, versus cashing them all in in October, a hell of a lot more. If oil rebounds back to $80 in the next year, maybe he won't look so bad. I doubt that happens.
    Dec 15, 2014. 04:45 AM | Likes Like |Link to Comment
  • Linn Energy Suffers Another Blow [View article]
    Dissing one crystal ball because yours tells you something else. None of us know how long this slide in oil prices will last, whether it is short term or longer, none of us. We all have opinions that differ from one side of the bell curve to the other. Who is right, only time will tell.
    Dec 15, 2014. 04:26 AM | 4 Likes Like |Link to Comment
  • Linn Energy Suffers Another Blow [View article]
    I will agree with wiseinvestorsdaily,

    Making a comparison of LINE to Enron is horrible. The reasons for Enron's demise have nothing to do with why LINE's stock is down so much. It's a ridiculous comparison.
    Dec 15, 2014. 04:19 AM | 6 Likes Like |Link to Comment
  • Will Linn Energy Post A Windfall Profit For Q4? [View article]
    Tim,

    I agree with your comments that the realized gains and losses on settled derivatives impacts cash flow. However, LINE's numbers are now "netted" which means there is no longer a detailed break out of realized and unrealized gains and losses on derivatives and their current reporting of these items is clear as mud. The cash settlements show that LINE paid out $12.507 million, not received cash. I have no idea what that number is supposed to represent. It was subtracted from cash flow, not added. Also, the $198.579 in derivative losses added back to cash is a net number. With the switch from Adjusted EBITDA to figuring DCF the way they do now they have become a "black box" for the average investor, IMO. We are left on LINE to spoon feed us instead of being able to figure this out from the 10-Qs and 10-Ks themselves.
    Dec 15, 2014. 03:54 AM | 1 Like Like |Link to Comment
  • My 2 Cents In The Amazon.com Cash Flow/Capital Leases Debate [View article]
    Paul0,

    The first transaction adds the FMV of the SBC option grant back to Net Income because it is a non-cash item that was subtracted as an expense to determine GAAP Net Income. The exercising of the options is a separate transaction, and cash is received. Without adding cash in the financing section for this 2nd transaction, the cash flow statement won't reconcile to the cash the company has. See link below:

    http://bit.ly/1ss8DPO

    Also, it looks like if you purchased assets other than working capital items, such as long term assets, with stock it would never show up in the cash flow statement. Same with paying off or retiring long term liabilities with stock. Instead, such items are presented separately below the cash flow statement or in a separate note to the financials. So, this appears to be a source of funds never accounted for in the cash flow statement.

    So, it looks like the operations section has to do with reconciling net income to cash, adding back or subtracting from net income all non-cash items affecting it, plus accounting for changes in working capital, with a few exceptions, as noted in the link above. Then the investing and financing parts record only cash inflows and outflows, it appears.
    Dec 14, 2014. 03:57 PM | Likes Like |Link to Comment
  • Linn Energy Suffers Another Blow [View article]
    There are a lot of half truths in this article.

    "During this time, the unit count has more than doubled, and Linn's stock is down roughly 67%"

    In late 2008 the stock got down to $11.20, so I wonder if you cherry picked the starting point.

    "Remember while Linn hedges some of its oil, about 25,000 barrels per day of production are not hedged. If oil were to average $60 next year, Linn would only be able to pay out about $500 million to shareholders after accounting for interest and maintenance cap-ex."

    Another assumption ($500 million) with no calculation as to how you arrived at the number. I've seen calculations which support the $2.90 distribution for 2015.

    http://seekingalpha.co...

    " However, Linn also has a growth cap-ex budget that needs to be funded externally, and I expect the growth cap-ex budget to be north of $600 million. Unfortunately, the financial markets are all but closed off for Linn. To borrow in the bond market would cost Linn north of 10%."

    They have a little over $1 billion on their credit line, if I am not mistaken. They were paying 9.875% and 11. 75% on $500 million plus in 2009. See page 55 of 2009 10-K,

    http://1.usa.gov/1vOITNT

    The amount of debt is a concern as its creditors may require LINE to cut or suspend the distribution to pay down debt, but much of the article is based on assumptions which lack support.

    It is common in a time of adversity to make matters a lot worse than they eventually turn out to be. It's called cognitive distortion.
    Dec 14, 2014. 12:47 PM | 17 Likes Like |Link to Comment
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