It appears from Linn's financial statements that the company bought a considerable amount of in-the-money put options on natural gas last year. These are more expensive than at-the-money puts. Specifically, Linn bought a lot of puts struck at $5 per Mcf from 2013 through 2017 at a time when the "strip" (the average price for that five-year period) was in the $4 to $4.50 range. The puts would have had an intrinsic value of 50 cents or more. Gas now trades around $3.15 per Mcf, after averaging $3 in 2012, making the puts more valuable still.
The increase in hedge prices is exactly why other primarily gas EPs are trading down on lower natural gas prices. ;-)! LIne's effective sales have not changed. So LINE out performs as price decline and under performs on the way up.
This is so bad I am not going to renew my Barrons.
"Anonymous short sellers are improperly mixing the definitions of cash flow and non-cash flow metrics (Net Income vs. Cash Flow)."
This is true.
"Linn reported a net loss of $430 million in the third quarter, for instance. But it determined that distributable cash flow totalled $202 million. The discrepancy was caused primarily by $520 million of unrealized losses in its derivatives book, which occurred in a quarter when energy prices rose."
Wall Street pros would not fall for this. But rumors of manipulating the price of puts could. But in this case paying an extra $0.50 is a use of cash, as it is intrinsic value. Something a company with cash flow problems would not do.