Sure, the hedges make it seem that cf from current operations will cover the dist, cap ex, debt servicing and G&A; but if ng & crude prices fall, the value of any new production will be lowered. making the share price totally dependent on the interest rate environment.
I can't see any reason for that environment to be more favorable than right now.
Not a growth story in either cf/unit or in cap gains.
Think the dist will go up between now and 2016?
Yes on distributions. It is a margin maintenance business production growth will occur at known prices.
Interesting thing about puts. If Obama managers to cause a depression the puts do not require the delivery of product.
If oil comes down domestic production will fall. Given the completely inadequate number of rigs working gas itself ng prices would nearly surely rise to the economic marginal cost to produce.
Nothing is completely bullet proof but LINE is very resilient business model. Given the cost to produce the world's marginal supply of oil it would have to be a depression which curtailed demand by millions of barrels a day. So it would probably present LINE the opportunity to add oil assets at distressed prices.
"the hedges make it seem " They do not make it "seem" anything.
They protect profits....period...., and they are hedged out to 2016 or 2017.
You have 5 years to see if oil prices are above their average hedge prices....and if they are above, then what percentage of them that are puts allow for added profit as well as the NGLs which are mostly un-hedged.
Let us know what you think after that slide is fully understood.