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Berry Petroleum Company, LLC Message Board

  • ronharv ronharv Jun 18, 2013 12:03 PM Flag

    From Wells Fargo (in part)

    Wells Fargo -
    • Key Takeaways.
    We believe LINE/LNCO has comeunder selling pressure today
    on market speculation that LNCO could realize a large tax liability in 2016. We do
    not believe this assessment is accurate. Weexpect LNCO’s tax liability will remain
    minimal into the foreseeable future inthe 2-5% range (i.e. in line with
    management’s guidance for 2013-15). As a reminder, LNCO benefits from
    minimal taxes at the C-Corp level due to LINE’s high tax deferral shield (i.e. in
    excess of 100%), which is primarily generated by LINE’s robust drilling program.
    Hypothetically, LNCO’s tax obligations could increase if LINE significantly
    curtailed drilling activity (as noted in our initiation report); however, we do not
    see this scenario developing in the foreseeable future. Notably, based on our
    meetings with management at the NAPTP conference last month, we believe
    LINE is likely to maintain its current capex spending level into the foreseeable
    future. While we believe short selling could result in continued unit price
    volatility in the near term, we continue tobelieve the closing of the BRY merger in
    Q3’13 will act as a meaningful catalyst for LINE/LNCO shares. We remain
    comfortable with our Outperform ratings on LINE and LNCO. To note, CEO
    Mark Ellis and COO Arden Walker purchased 10,000 units and 5,000 units of
    LINE, respectively, on 6/14/13, underscoring management’s confidence in
    LINE/LNCO’s business model.
    • Distribution Increase Still Anticipated For H2’13.We continue to believe
    LINE is on pace to deliver a 6.2% sequential distribution increase later this year
    (i.e. to a quarterly distribution of $0.77 per unit) based on anticipated accretion
    from the BRY acquisition. However, since the BRY merger has been slightly
    delayed from its originally anticipated closing date (i.e. we believe mid-August
    versus early July previously), we anticipate LINE’s distribution increase could
    occur later in the year than originally antic

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