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Ship Finance International Limited Message Board

  • keebon keebon Apr 29, 2013 7:29 PM Flag

    Linn Energy

    I am getting psyched up to buy LINE and/or LNCO. These are oil and gas MLPs with shared assets. LINE reports on a K-1 and LNCO is a c-corp reporting on a 1099. Both starting monthly payment of distributrions. They do get favorable mentions, but I have passed before. However, they are acquiring Berry Petroleum (BRY), a nice small-cap E&P stock I have owned in the past. This is a good acquisition for future development. Yield over 7% for LINN and over 6% for LNCO.

    Any thoughts or opinions?

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    • LNCO is not an MLP. I think LNCO sells for more than LINE because there is no K-1 to deal with and it's safer to put into IRAs. Linn's purchase of BRY adds more interest to Linn.

      • 1 Reply to cibrocsa
      • cibrocsa,
        Actually, LNCO is an MLP. However, it has elected to be a C-Corp (as opposed to an S-Corp) for purposes of taxation. That means the distribution is reported on a 1099 and taxed the same as regular dividends. That explains the difference in yield... because investment funds and many private investors prefer to avoid tax complications from MLPs that report distributions on a K-1. You have to dig a little on the LNCO website to find this but it's there.

        This situation used to be pretty rare, but now more opportunities are available to combine the high yield of MLPs with the simpler 1099 tax treatment of the distributions. Examples are CPLP, GMLP, SDLP, NMM, and TOO.

    • Both LINE and LNCO have the same fundamental value. Perhaps LNCO slightly lower due to minor additional taxes.

      So if one is dramatically cheaper than the other please go to the lower price.

      It is interesting that LNCO could sell for so much more than LINE as this is what is known as an 'explainable' market inefficiency. I would add as LNCO has more institutional ownership and a wider possible ownership base it should have the more accurate price or reflection of value.

      The big future payoff is American natural gas selling first at the marginal cost of production estimated anywhere from $4.5 to $6.50 and then like the rest of the world in relationship to oil BTUs. 5.6 mfc = 1 bll btu.
      5.6 * 4.25 = about $24 oil.

      It can and is blended into gasoline around the world as methanol. However, it is blocked in American by the extremely narrow corn ethanol lobby. Americans certainly would benefit from a 100%+ lower cost of methanol displacing corn ethanol in the EPA mandated 10%+ blending.

    • K-bon...a lot of the investors have been selling and getting out of LINE because of its long term poor results...even some of the 'long term die hard LINE investors' have gotten tired of the poor results...I made nice profits in the past on LINE and EVEP but the oil sector seems to be in a 'long term slump'...

      More, it is hard to find out anything on the LINE message board because of at least one guy there is always talking politics, starting arguments or name calling....however, LNCO seems to be doing better in capital gains than LINE (even though they are the same company)...

      That said, there are probably better places to put our funds than in oil or natural gas 'until more dust settles'...I really do believe that investors should have some oil stocks, but I cannot find one that has much going for it 'at this time' because of the 'increasing cost to produce' and the falling/poor prices of oil and natural gas....

      A lot of investors seem to forget that most oil wells lose about 40% of their production the first year and about 25% of the production ever year after that... a oil company that has 'a lot of wells' will end up always spending more to maintain and then to shut down older oil this time, a lot of oil and natural gas companies are having trouble maintaining their current dividends and distributions...! Good luck on your selections...! $tagg...!

      • 2 Replies to staggman99
      • I agree with Stagg...LINCO too high right are better off with BWP and ETP..I own both and I am up nicely including the 7% divys....they are getting top heavy at the moment, and I may take profits these two on the dips, IMHO....better than LINCO.

      • Stagg, sorry to zing you but I think you may be letting your treatment on the LINE board influence your views. I don't know what you consider to be a "long term performance" but it looks to me like LINE has a pretty good long term performance. The stock bottomed around $20 during the crisis and is now $38 and has paid a decent yield, currently over 7%. Going back further, the stock had peaked around $40 at the height of the bubble, but that was up from $20. Again, where you sit determines where you stand, so if you bought LINE at the top back in 2007, you are about even, but collected about 7% along the way.
        As with almost any sector, there will always be some companies that outperform. GPOR is an oil and gas stock that has had quite a nice run, recently moving from $17 last July to $52 because of their results in the Utica.
        Your comments about oil wells losing their production can also be applied to most natural resource companies -- that is the nature of their business -- and to most businesses (e.g., a retailer has to maintain lots of stores even if the sales per store slow down in some areas; an mREIT has to buy new mortgages with the principal that is repaid on the mortgages that it owns and the new mortgages may not have as high interest rates or spreads; a tech company has to invent new products. The depletion or maintenance in natural resource companies is built into the business model.
        In investing, there is no one sector or one group of stocks that always performs the best or represents the best value going forward.

    • I like LINE...alot.

      The only thing that was first a little difficult to understand about them was how they can still add profits while being 100% hedged....for oil & for natural gas.

      Their NGLS are not hedged and they are not adding more oil puts or gas puts in there are some hedging changes that you can follow as they also post hedging updates with the details.(from their presentation section at the Linn webpage).

      The management seems to be one of the best around.

      You may want to read about Mr. Ellis who was from conocophillips & also read about Mr. Rockov....

      They are also very helpful if you decide to call their IR to ask questions....If you do, then ask for Clay.
      They are better at answering questions have by phone than by email. If you email, you (only) might get an answer.

      Also, may help to look at FINVIZ to see the recent price now shows a double bottom at around $34.50.

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