Linn energy made their public statement with full understanding that the statement needs to be 100% accurate, truthful and not fraudulent. They have to abide by disclosure laws and regulations. Linn Energy is not protected by 1st amendment rights or "analyst opinion" safe havens to be able to say whatever they want.
THE TRUTH: and fact to understand is that the analyst opinion by Howard Weil (Amoss) is purely an opinion, and he still has a $36 price target on LINN Energy. If some of the outlandish and reckless comments he is insinuating are true...HE WOULD NOT HAVE A "SECTOR MARKET PERFORM" AND $36 TARGET PRICE. He would have a big overstated SELL rating, and would be calling the SEC and law enforcement agencies to turn Linn in for fraud. AMOSS HAS DONE NONE OF THAT. It would appear he is either part of a "short and distort" or a bashing of the stock to get the price down to buy. That"s what it more appears like if anything. They rate Linn: inlline as a "SECTOR PERFORM" AND A $36 PRICE TARGET. The majority of analyst covering Linn rate it buy/strong buy with $42-44 price targets.
So, if Howard Weil's Amoss is to believed, he needs TO BELIEVE HIMSELF, and rate Linn a SELL and have a drastically lower Target Price.
The analyst has said (not being an accountant) that derivatives should be considered as though they were similar to expensed interest. Where as on the other hand the company says they should be treated as assets. It would seems to me that derivative expensed to Interest should be tied to an interest rate and we would then call that a loan . It would also seem logical that derivatives not being attached to an interest rates could only be properly valued when sold and expensed as assets. This should be a non issue by the time of the CC
The economic reality is the puts are 'in the money'. The value is increasing as natural gas prices fall.
Line will be selling their natural gas output for approximately 5.42,5.00,5.00,4.88 form FY13 to FY17.
With current spot market at about $3.20 the intrinsic value in the 2013 puts is $2.12. Gas futures five years out are still around $4.50.
Here is the completely insane thing. The clown claimed when ng prices went up LINE did not inappropriately account for the 'loss'. What loss? The gas will be sold for the strike price or above so it is positive.
The reality is LINE is forward selling production and locking in sale prices about 40% above spot.
Worse still this Weil clown is prattling about when ng prices went up causing losses in the hedge book and so with gas prices down by his delusional reasoning DFC should be leaping up with lower prices.
The odd thing is that when prices go down far enough management actually might want to cash the puts in and not produce. But if prices were higher they might actually want to produce above and beyond the hedged volumes.
If the editors at Barrons cannot keep such blatant silliness off their pages then what can be trusted in the publication?
These puts are actively traded and the market prices are known daily. But this is not a company speculating but rather hedging out risk to the business model. This is nothing like exotic credit market derivatives which were so popular with the Progressive Wall Street bankers.