Having read this message board and all the garbage being posted every second..You are to be congradulated on your analysis. I too am lonfg BBEP and LINN for many moons and firmly agree with the SEC doing nothing more than a CYA move. Both companies as well as all energy companies play futures and other actions to cover themselves down the road..And yes, if the accountants found this this GAAP or non-GAAP move was a direct distortion of earnings, you had better believe somewhere in their report would be a CYA statement. This big school so called economist is a real piece of work and if I had my way, would hire someone to check on his motives He will eventually see the error of his ways.. !! Semper Fi..
One slight correction, GAAP accounting has nothing to do with the LINE (and BBEP) attacks, that was based on LINE capitalizing puts with related acquisitions . . . for purposes of disclosing coverage in their news releases, something the auditors do not have a say in, and capex vs. maintenance capex, which again, is an issue only with DCF and coverage. The auditors would be concerned about information accompanying their opinion in the annual report, but if you look, you won't find "DCF" or "coverage" there. Just a general misconception about what auditors do, and what they can, and cannot say.
For those who have been following what Maintenance Cost is there are actually two major components of what is termed "Maintenance Capital" are audited (tested) in the GAAP numbers provided in the Financial Statements.
One component (routine workovers which is work in the same wellbore and production zones to restore production) are expensed and show up in the GAAP audited (tested) financial reports under operating/production cost in the Income Statements and under operating cash flow in the Statement of Cash Flow. If this part was incorrectly stated within the "Maintenance Capital" number the residual/remainder would still reside in Adj. EBITDA/DCF as operating/production costs.
The other component (major recompletions which is work in the same wellbore but a different production zone to restore production) is capitalized and shows up in the GAAP audited (tested) financial reports under depreciation/depletion in the Income Statements and under Investing Cash Flow in the Statement of Cash Flow and so never hits adj EBTIDA/DCF unless provided by the Company. On Major Maintenance projects even the two accounting bodies FASB/GAAP (US) and IFRS (international) cannot agree on how Major Maintenance should be recorded in the audited financial records so there is a great devastation between companies in the actual financial records between like companies. Now if the accounting bodies cannot agree on how it should be recorded in the audited records what do you think will be the SEC response on how it should be applied against non gaap reports.
To make sure your mlp can meet its distributions the sanity check should be does the company cover its annual distributions from operating cash low. If so then you know at least part of Maintenance Costs by default are begin covered by adj. EBITDA/DCF and the other part may never have a consensus view so now you have to say do I trust the integrity of the company I am investing in to provide the most reasonable data