BRY EPS estimate for 2014 is $3.20 (a decline from 2013) and current dividend in $.32 annually....And many BRY holders thing Linn should sweeten the offer to 1.5 LNCO shares per BRY share. Are you kidding? Without the Linn merger, BRY, with measly dividend and no EPS growth, is, at most, worth about 12 times estimated 2014 EPS or about $36.00 a share....and that's being charitable.
Bry is better taking the deal as 1- Nice dividend and 2-Price gap will close. Otherwise based on their eps this stock with their existing dividend will sell for under 35 per share. They are better together. Watch and see the price gap close over the next couple days. I do not believe that line will offer more.
I was a bit harsh on BRY. 12 times next year's EPS estimate is $38.40, not $36.00. The immediate post merger announcement valuation of BRY by Linn was a bit over $46. In the interim, BRY has shown a couple of good quarters...I'd estimate that without the Linn deal, BRY would drop back to about $40-ish.
We'll see how things develop now that the long awaited S-4 is approved. Next week's Conference Call by Linn should be very interesting.
Without the stink of the SEC inquiry and with the S-4 no longer in limbo, Linn 's price should get back to the mid- to upper-$30's. If so, everyone wins...BRY, LNCO, and LINE.
The price action of BRY versus LNCO suggests that the market thinks the berry deal will get sweetened. Basically BRY is staying high, even tho LNCO is 30% lower. The whole complex stills moves up together, but BRY doesn't dip as deep when LINE\LNCO dip.
However that does not mean the deal will get sweetened. If speculators have been buying bry high, they could get hurt over the short term if the deal fails or stays the same.
Anyone who just looks at the price of LNCO x 1.25 relative to the BRY price, does not understand that a big part of the incentive in this deal for BRY shareholders is the dividend.
At a 10% discount rate, the NPV of the incremental dividend stream adds $21.69 in value to the deal.
BRY management and institutions/mutual funds do grasp this concept, and are motivated for this deal to happen at the original terms.
You are correct Sir. The BRY people can kiss their #$%$ and the $3.08 POTENTIAL dividend goodbye if they reject the deal! Their stock price will revert to their old norm (mid thirties) in conjunction with the .32 cent annual dividend.
If I was Line.. and I do hold stock and options in both lnco and line, I would give bry ONE shot at the already given terms.. Good for both, BUT if stiff resistance , would go elsewhere .. With the SEC out of the way, and line coverage well over 1x now, and better with permian acquisition , divy well covered PLUS said divy higher that most so expect line to rise to at least mid 30s, lnco a bit higher.. Any bry holders who thin otherwise bye bye and watch it sink without the merger You had you chance to sell, pay your tax to obuma, and buy lnco etc that gap is gone via the tax you would pay to do it now so await the tax free exchange
Why would you only assign a 12 PE when many other independent oil and gas companies of similar size are selling for 17-22 x earnings?
At 17 times $3.20 gets you well over $50. 20 times ...well you can multiply.
Many other independent oil and gas companies are growing earnings...warranting PE multiples in the 13-16 range. BRY has been priced to some extent on the prospects of getting a $3.85 distribution per share following the merger..that's worth something in the low to mid $40's.
Seriously, would you buy BRY at $48 a share? With 90% of BRY shares in insider and institutional hands, it's easy for the thinly traded balance of shares to get priced out of line with underlying value.
Just my opinions...