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Linn Energy, LLC Message Board

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  • rrb1981 rrb1981 Mar 25, 2012 12:32 AM Flag


    "less than a yaer"

    Is that supposed to be a phoneticly written homage to north Texas?

    Yes, I was well aware of the Hogshooter well. Not all of the GW is the same, you should actually look at some of curves in the Linn presentation to see the variance.

    Linn has made this comment multiple times, and 12-24 months is very conservative and for MLP investors being conservative is important. If I had said 2 month payback on GW wells, I can assure you that you would be trying to flaunt in my face that many of the wells don't pay back for 12+ months. Of course with you, you pick at every little detail because you have some deeper problems. Like arguing over WACC when you know good and well that back of the envelope calcs are perfectly fine for ball park estimation of accretion. So what if you are off +/- 10% on the accretion. If it is $.23/unit vs $.21. Big deal. Most investors don't even know what ebitda stands for.

    It is funny that you would even make this point about a 2 month Hogshooter well pay back, because it only highlights how foolish Linn is for spending $1.2 billion for flat, little to no upside Hugoton production when it could have put a lot more capital to work in the GW and gotten far superior rates of return and not dilluted the per unit exposure of Linn holders to the GW's clearly world class returns.

    You would be hard pressed to find a basin with superior economics other than perhaps a few sweet spots in the Eagle Ford. I think last presentation I saw from one of the producers showed GW (liquids rich wells of course) being hands down far above all of the basins, including wet Marcellus. Remains to be seen, how productive the Utica will be once industry numbers start creeping out. Right now, the data set on the Utica is too sparse to made any serious generalizations, plus, you have to be wary of Aubrey McClendon talking his own results up to lure in JV partners!

    So, with Granite Wash and Hogshooter wells costing perhaps $7 million and maybe much less with pad drilling, Linn could have put $1.2 billion to work drilling 170 GW wells. Of course, it would take many years to drill that many wells, but Linn would receive a far better rate of return and far better accretion.

    With 2 month paybacks, and taking into account drilling, fracing/completion times, Linn can almost recycle cash 3 times a year on these wells assuming similar performance. It is crazy to dillute that kind of exposure.

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