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Linn Energy, LLC (LINE) Message Board

  • sundancekid222 sundancekid222 May 4, 2012 7:12 PM Flag

    OT JACK

     

    Jack, thank you for the tip on MTGE. Great earnings. I may now be developing a MANCRUSH on you! LOL Have a nice weekend sir.



    The Kid

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    • I don't believe so.

    • I understand your predicament. Liza actually posted heavily on the topic of selling "dog" MLPs and rolling the proceeds into top performers. If you have owned your MLP for years and years as many of us have, your cost basis is often 30% or 40% below the current price and your return on original investment is often double digits. When you divest, you must take into account after tax proceeds and what returns those proceeds will generate.

      So, sometimes it isn't a better proposition to unload a dull, sleepy MLP like NSH with pedestrian 4% distribution growth to chase something like WES especially when you would be receiving a much lower initial distribution yield, incurring a taxable event and paying a premium for past performance that might not continue. Each person must make those decisions.

      I am happy owning solid income generating stocks and so long as the fundamentals are not terrible, I am fine holding through the rough patches and simply redeploying the distributions into better prospects.

      I consider quite a few of my MLPs to be current "dogs" such as NSH, ETE and SEP. I'll gladly hold these guys until times are better and instead redploy the distributions elsewhere.

    • rp,

      I did not realize the PRB coal was that cheap, are you certain that pricing disparity still holds even with gas at $2.30/mcf?

      It may very well be that cheap, especially since transportation costs would be relatively low due to short delivery.

      I used to follow met coal more closely but haven't really paid much attention lately with my investments in coal at virtually zero. As I mentioned, I am watching PVR closely. It is a nice play on coal, with midstream becoming significant once the deal is finalized.

      I have looked at Oxford and agree that it is an interesting play, but I saw very little that differentiated their assets from other players. It looks more like a play due to the corporate structure and the subordinated units helping bear the cash flow shortfall.

      It is a value play and will likely make money for those that are willing to follow it closely and know when to jettison their holdings. A cigar butt play as Ben Graham would describe it.

      I prefer to own investments that will flourish for the next 10 yrs with strong balance sheets and competent and capable management teams that have skin in the game.

      Most investors will do well to seek quality stocks and buy them at attractive prices and hold them a long time and let the rising dividends and distributions lift the price.

    • I have ARLP and PVR. My cost basis in both are still well below current PPS so my ROI is better than anything else out there. ARLP has hedges through 2014 and PVR has good diversification, pretty unique among all energy companies - however, like GE that diversification holds it back. No worries, the 10% I get on ROI and increasing ditribution every quarter makes it difficult to find a replacement even if I wanted to.

    • rp,

      I owned AHGP for a while as it had superior distribution growth leverage due to the IDRs. AHGP and ARLP are now far to pricey in my opinion relative to the commodity and pricing.

      I think Penn Virginia (PVR) is an interesting and less risky way to play coal. PVR is moving away from coal and into midstream, but a significant amount of their DCF will still be generated by coal and will be for some time unless they choose to divest their coal ops. I think they will instead let it go into run off mode. They already set aside $7.5 million quarterly for maintenance capex to account for depleting coal reserves. That money will likely be reinvested into the midstream side.

      Still, the market hasn't given PVR much respect and it presents a nice opportunity to pick up some good yield with lower risk than many perceive and sit back and let that risk premium hit your bank account every quarter.

      I'm not entirely thrilled with PVR's acquisition given it has a significant amount of dedicated dry gas acreage, but it was/is accretive and diversifies them away from coal, so only time will tell how well the development plays out.

    • rrb, that wasn't the point re: Jack, but you do bring forth very valid points.

      Do you realize that Powder River Basin coal is 25% the cost per kwh as natural gas? Which is why most Western power is coal (and hydro) vs. NG, even though NG is more plentiful?

    • Are you replying to my post, liza?

    • Actually I think the Oxford discussion and coal in general is a very relevant topic to discuss, especially consumption trends vs natural gas.

      Coal exports are up, and we have an administration that is very unfriendly towards coal fired power plants, but which so far have not been nearly as aggressive in shutting down coal mines. Of course, it doesn't hurt that states such as West Virginia, which are heavily tied to mining, have representatives that have told Obama to back off on shutting down the mines.

      The miners don't care if the coal is burned in the US or overseas as long as they are employed.

      What will be interesting to see is if any sort of Sasol type players step up and attempt to build some sort of coal to liquids facility on a large scale. They could even incoporporate carbon sequestration and sell the CO2 for tertiary recovery, though a pipeline would be necessary, so perhaps piggybacking on an existing line would be best, such as Denbury's Green line.

      When politicians make disruptive changes, it often leads to unintended consequences. Wouldn't it aggravate the left if coal to liquids took off in the US vis SASOL's Fischer-Tropsch process?

    • Where are Norris, Groth and Sand in this discusssion? Why aren't they defending Hero Jack?

    • It appears everyone has their price. Some are a bit higher han others.

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