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  • Linn Energy: The Earnings Reporter Edition [View article]

    I couldn't recommend LINE. If I were an investor I would look at other oil/gas plays besides LINE. LINE is a skunk, IMO, a real stinker.

    The 65% cut in capital spending means the production increase will be short lived. Too much debt, not enough internally generated cash. I'd look at the equity REITS, some paying in excess of 6%, instead of LINE. Much less risk and a very good return on investment. A bet on a rebound in oil is very risky, IMO. No ones knows how that will play out, especially when production is just waiting to kick in with an increase in price (no lack of supply).

    October is likely to see a credit reduction for LINE with the redetermination. Assets are worth less than the debt. Hint: probable unit price decline. LINE is for gamblers, not investors.

    The hedges insure LINE will receive the expected cash flow from the production hedged. That's all. With a $2.1 billion value of the hedges there has been a $2.1 billion drop or decrease in value in the hedged production. They offset each other. So, hedges mean stable cash flow, not an increase in profits.
    Jun 21, 2015. 09:24 PM | Likes Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]
    He could be right about oil rising, but the shale oil we are producing now has created a source we didn't have 6 years ago. If prices go up some, so will shale oil production. I don't think we'll see $100 or even $90/barrel of oil in the next 10 years. That means a permanent impairment of assets and less revenue. I think LINE has a real problem on their hands if they don't reduce the debt load and remain so dependent on external funding. The model worked while prices were very high and increasing. That's over, IMO.
    Jun 21, 2015. 02:40 PM | 1 Like Like |Link to Comment
  • How A Part-Time Uber Driver Can Buy A Tesla [View article]
    I think to put gasoline versus EV on an even scale, you have to take in consideration the amount of state and federal taxes on gasoline for payment of infrastructure. That amounts to $ .48 per gallon of gasoline. At 25 mpg and 60,000 miles, that amounts to $1,152 that needs to be deducted from the cost of operating an ICE, in comparing it to an EV. IF EVs become the main car people are buying, then maintenance costs of state and federal roadways will have to born by EV car owners. Since the cost to operate and maintain EVS is a lot less, it makes sense to me that state and federal governments would try and recover more of their maintenance costs from EV owners. The only reason they aren't recovering more of their cost from ICE owners, through gasoline taxes, is because gasoline is so expensive already. I could see $. 75 or $1.00 of taxes per equivalent gallon of gasoline being collected from EV owners, amounting to $1,800 to $2,400 being subtracted from the difference in maintenance costs between ICE vehicles and EV vehicles.

    Once you open the link, click on "April 2015 State Motor Fuel Reports".
    Jun 21, 2015. 05:26 AM | 4 Likes Like |Link to Comment
  • How A Part-Time Uber Driver Can Buy A Tesla [View article]
    What about tire changes for the Tesla? Don't tires wear out by at least 30,000 miles, and aren't you looking at at least $1,000 for new tires? Then what about the cost for being able to use the supercharging stations, 1500 at least? So, knock the difference down by about $1500 to $6500.

    Then there is the issue of using the highways, local and state, without paying for them. At some point that will become an expense of an EV, also, just as it is for an ICE.
    Jun 21, 2015. 04:48 AM | 2 Likes Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]
    ""If you don't think Wall Street and its Minions will bend over backwards to get any capitaal the company needs, you better rethink your position."

    Creditors were willing to loan capital as long as energy prices were on the increase and the FMV of the assets exceeded the amount of the loans. Energy prices have collapsed, making the asset values worth far less than when the loans were extended. There may be some forbearance in the hopes energy prices will recover, but there is a limit on the time that forbearance will be extended. If prices don't recover in the time allowed, it's curtains for LINE investors. Distributions will be suspended under that scenario so LINE can use the funds to pay off debt. Debt that exceeds the FMV of the assets on which the loans were made.

    This is common sense, Kirby. It doesn't require a degree in accounting or finance to understand this.
    Jun 20, 2015. 10:45 PM | 2 Likes Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]

    "I love you SHORTS trying to scare the LONGS out of their positions, so you can cover at a greater profit. You try to let everyone think that the company is in dire danger of a default and thats far from the truth."

    I have no investment in LINE, of any kind. I also have said nothing of a default, either. I have stated that LINE is a highly risky investment.

    " This company has seasoned harden oil patch veterans who had the foresight to hedge the companies production , the best than any company in the oil patch. they had the foresight to trade and sell much of their high capital intensive properties, and were attacked by hedge funds, such as Hedge Eye with erroneous accusations which the SEC investigated and completely exonerated Linn."

    They used to hedge for 4 to 6 years out, now they are only hedged on oil through 2016 and nat gas through 2017. They could have extended those hedges last year, on oil any way, at close to $100/barrel prices, but they didn't. MEMP has a better hedge book. (See page 10)

    The law suit claimed that LINN used wrong metrics to calculate DCF and that they were deceptive in doing so. The decision stated that it was not the court's proper role to decide the metrics on how DCF is calculated, only that LINN was not deceptive in calculating it, as was claimed by the plaintiffs, so the plaintiffs lost their case. That is NOT an endorsement of how LINE calculates DCF.

    "As far as GAAP also keep in mind that the assets need to be written up as the price of oil & gas has increased since their re-determination at the lows, so it off sets any drop in the Hedges."

    No, the current value of assets needs to be written down, not up. The FMV of hedges has already been adjusted to current energy market prices, but the value of assets has not.

    "All of these are nits relative to the PV10, which at 12/31 was based on $95/bbl oil and $4.35/mcf gas. At current prices the PV10 would be less than $7 bln, I estimate, and a current NAV might very well reflect a negative #. No position here."

    "Why do they have to pay their debt off??"

    I have been clear that not all debt is bad, but the amount of debt in relation to total assets and using "coverage" financial ratios to measure LINE's ability to meet its debt obligations.

    Take the " cash debt coverage ratio" for example. It is net cash provided by operating activities divided by average total liabilities. For LINE, for 2014, that would be $1.712 billion divided by $11.88 billion. Not good. This ratio indicates a company's ability to repay its liabilities from net cash provided by operating activities without having to liquidate the assets employed in its operations. It signals whether the company can pay its debts and survive if external sources of funds become limited or too expensive. LINE has $3 billion of notes coming due in 2019, as well as payments due on its credit facility in that year. How will they meet that obligation at current CFO levels without selling operational assets?

    Then there is "debt to total assets" ratio. Taking the FMV of assets, rather than the book value, that would be anywhere from $7 billion to $10 billion at current energy prices. Lets just say its equal to total liabilities. Very, very poor. This ratio tells the amount of assets provided by creditors, which currently is at least 100%.

    Then there is free cash flow, and LINE's has always been negative. Positive free cash flow would give LINE financial flexibility, such as now in a climate of lower energy prices, to maintain its capital investment. As it is, LINE has had to cut back drastically on their capital budget, much more so than other companies in the sector, and has no free cash flow to pay off debt.

    That is why LINE should pay down its debt level.

    "If you don't think Wall Street and its Minions will bend over backwards to get any capitaal the company needs, you better rethink your position."

    I think the credit redetermination, come October will tell a different story. I think there is very likely to be pressure on LINE to start to repay some debt until prices recover, because its debt to asset ratio is at 100% or worse.

    "Thereby obtaining a slow , but steady method of lowering their debt."

    Perhaps you failed to read some of my other posts in the last few days showing LINE has NEVER lowered their debt levels. It has ALWAYS increased.

    "Also they have $1,500,000,000.00 to invest and are pursuing special situations in which to purchase additional oil and gas properties ."

    Where did that capital come from? Debt, meaning not internally generated. Again, not good.
    Jun 20, 2015. 10:12 PM | 2 Likes Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]

    "At March 31, 2015, the Company’s hedge book had an estimated net positive mark-to-market value of approximately 2.1 billion."

    As I have already explained, GAAP reports the value of the oil and gas reserves that are hedged at historical cost, not FMV. While the hedges are reported at FMV. The FMV of the hedged reserves have lost about an equal amount in value that the hedges have gained, or a loss of $2.1 billion that isn't reflected on the balance sheet. Keep that in mind.

    As far as assets, they don't produce sufficient revenue to pay down the debt and pay the distributions. LINE is overly dependent on external funding, rather than internally generated cash, as a result.
    Jun 20, 2015. 01:24 AM | 4 Likes Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]

    "So Far thru May 2015 they have
    Repurchased a total of ~$184 million in principal amount of senior notes
    at a cost of ~$165 million. Thats a discount of $19,000,0000.00. This management team are veterans of past oil patch down turns and are making lemonaid out of lemons. "

    No, they traded debt for debt. The credit facility, which is listed as a long term liability on the balance sheet, increased $180 million from Dec.31, 2014 to March 31, 2015, and the senior notes declined by $77 million. Total long term liabilities have increased by $102 million in that time frame.

    LINE is struggling with its debt load, thanks to management, and the assets are worth less than the total liabilities. You post hype, Kirby.
    Jun 20, 2015. 01:19 AM | 3 Likes Like |Link to Comment
  • Linn Energy Needs A Deal Announcement To Move The Value Needle [View article]

    Total liabilities decreased by $86 million, so maybe that is what you are looking at. Current liabilities are going to fluctuate up and down from quarter to quarter.

    What I was focused on was long term debt, nothing else. You did notice that it increased as I stated, and that more was borrowed during the quarter than was paid on debt, per the cash flow statement?

    Look at financing activities on the cash flow statement: $280,287 million was paid on debt, but $395 million was borrowed.

    Go back to 2006 and make a spread sheet of cash flow from operating activities, cash provided or used in investing activities, proceeds from debt and equity, and payments on debt, as well as distributions paid. It isn't a pretty picture.

    Total cash flow from operating activities: $4.544 billion
    Total cash used (spent) in investing activities: $14.483 billion

    Proceeds from debt and equity: $30.157 billion
    Payment on Debt : $15.969 billion

    Distributions paid: $3.854 billion

    Long term debt has steadily climbed, never being paid down. As rlp2451 pointed out, assets from the end of 2014 to March 31, 2015 decreased, as did equity. I don't see how any of this is "improvement".

    The current FMV of LINE's assets are worth less than its long term debt. LINE isn't done writing assets down from impairments yet. LINE depends too much on external funding, mostly debt, to fund its operations, and doesn't generate enough cash internally.
    Jun 19, 2015. 01:18 PM | 2 Likes Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]

    "How many companies have you been chief Executive Officer? "

    If that is what it takes to be able to tell a good investment from a highly risky one then most of us are in trouble. However, I have done the accounting for two public companies, including preparing the financial statements, as well as for several private ones.

    I didn't say that all debt was bad, did I? LINE has way too much of it, so much so that its assets are currently worth less than its long term debt. That is healthy to you, seriously?

    Ahhh, the hedges. The hedges, rather derivatives', purpose is to help insure stable, non-volatile cash flows, not profit.

    "At March 31, 2015, the Company’s hedge book had an
    estimated net positive mark-to-market value of approximately 2.1 billion."

    Since the derivatives are being used as hedges, there is another side to the derivative transactions besides the current value of the derivatives. The derivatives are being used to hedge the price of oil and gas for a specified amount of production, so that when that production is sold LINE receives a certain amount of cash from the combination of the derivatives settled during the period plus the sale of the oil and gas inventory. When the price of energy goes down, like oil has in the last 9 months, the fair market value of the unsettled derivative used to hedge the oil production goes up, generally in about the same value, so that to the degree the derivative is effective as a hedge, there is no material gain or loss on the sale of the oil production.

    So if the fair market value of the hedge book is $2.1 billion, then the fair market value of the hedged production has declined by about that amount, also.

    LINE used to report adjusted GAAP Net Income or Loss in its 10-Qs and 10-Ks but no longer does. They are less transparent now. That number would have given you a better idea of how they did, earnings wise, for an accounting period. The GAAP Net Income is distorted. Do you know why?

    They reported total gains from derivative transactions of $425 million for the first quarter, but a good portion of that are changes in the FMV of unsettled derivatives contracts, or unrealized gains. The changes in FMV of unsettled derivative contracts (unrealized gains) need to be taken out of the gains reported for the quarter to get actual realized gains for the quarter. My guess is that actual revenue for the quarter was around $700 million, rather than $917 million.
    Jun 16, 2015. 09:40 PM | 2 Likes Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]
    Keep drinking the Kool-Aid, Kirby.
    Jun 16, 2015. 05:46 PM | 1 Like Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]
    I don't understand what you are saying. Yes, I recall LINE being called Ponzi like, but I never said that.
    Jun 16, 2015. 11:53 AM | 1 Like Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]

    Ponzi allegations?
    Jun 16, 2015. 11:14 AM | 1 Like Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]
    IMO, the emphasis on earnings and maintaining healthy financial ratios will provide the greatest long-term unit holder value and price per unit. In that regard, it's no different than a C-corp.

    I think what LINE is doing is taking revenue earned that should go toward paying for assets acquired, and paying that out in distributions instead. In other words, it is taking revenue generated from debt financed acquisitions and paying that out in distributions. Indirectly, distributions, the majority of them, are being financed with debt and equity, not from earnings.

    Their "credit card" is maxed out. Time to be fiscally responsible and pay a lot off of "the card".

    LINE management is experienced all right. Experienced in knowing how to maximize bilking the company to maximize executive compensation.
    Jun 16, 2015. 02:37 AM | 2 Likes Like |Link to Comment
  • Linn Energy: The Earnings Reporter Edition [View article]
    "Relative Unitholder Return. Historically, the Committee has used total unitholder return relative to a group of peers as a performance measure in the EICP. The Committee removed total unitholder return as a performance measure in the EICP with our implementation of performance units, as described beginning on page 29. However, for 2014 EICP awards, the Committee took total unitholder return into account since performance units awarded in January 2014 will not become eligible for payment until early 2016. The Company ranked in the bottom quartile in total unitholder return in 2014 compared to both our compensation benchmarking peer group and the upstream master limited partnership/index peers described earlier over the last one and three year periods. " (See pay27 in link)

    LINE's compensation for its executives is based primarily on maintaining or increasing the distribution per unit, and on increasing production and the amount of total cash costs. There is no incentive on maximizing its Net Income or in paying down debt. That's why its cash flow numbers look so horrific. Notice that LINE took out total unitholder return as a performance metric when LINE did so poorly on this metric (for the last one and three years no less). They change the performance metrics at will to make them look better than they are really doing. They did so with DCF, and now with executive compensation.

    Primarily, they are about maximizing distributions at the expense of other sound business practices, such as paying down debt and maximizing earnings. I worked for a partnership, a small architectural/engineering firm with annual revenues of about $15 million, who followed similar goals of bilking the partnership of all its cash through executive and top level employee compensation without consideration of how that bilking would impact the long term health of the company. It went bankrupt about two or three years after I left, when the next recession hit. I left because the bilking didn't look healthy to me, just as LINE's emphasis of the distributions doesn't look healthy to me. IMO, the emphasis should be on earnings and maintaining healthy financial ratios.
    Jun 16, 2015. 02:14 AM | 2 Likes Like |Link to Comment