Given what is going on they have to put that footnote in there. They have already had one coutner party (Lehman) go belly up so of course any auditor is going to make them disclose this risk. I don't know how likely it is to happen I guess it depends on who the hedges are with. You wouldn't have thought Lehman was going to go belly up but they did. The market seems to be pricing in a chance that the hedges won't hold. Otherwise there is no reason for the stock to be where it is oil prices dropping have no real affect on LINE if the hedges hold. Lower oil prices should actually help them by increasing demand from where it would be otherwise as long as the hedges hold. If we can get through the next month or with no majors financial instituation blow ups I think LINE will start to go up as people realize the financial system is stable.
I am new on the oil hedges.Explain the counter parties. Who are they and why did Line not just sell forward NYNMEXCL crude oil futures to cover their forward production I know the margin calls can be expensive if futures rally but at least there would be no chance of counter parties going BK . As I said I am new to these counter parties hedges. Answer please
You can search this Linn message board for a list of counterparties (same banks as on their credit facility).
Keep in mind the counterparties offload the hedge risk to those on the other side of the trade such as airlines. The counterparties on Linn are probably not highly exposed to the change in the hedge value themselves.