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Linn Energy, LLC Message Board

  • no1matemary no1matemary Mar 25, 2013 6:06 PM Flag

    Someone look under LINE's fundamentals ans explain all the minus signs to me.

    I am a long term holder/supporter of this company but this is very concerning!

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    • Slides on the latest 2 presentations show pro forma Berry acquisition debt 7.7B with equity at 11.8B .Also another slide shows D/ebitda for 2013 which includes 6 months of Berry to be 7.7b/1.96B =3.92.So the debt as a % of capitalization is 40% and the D/Ebitda at 3.92 are both #'s that indicate to me Linn is not highly leveraged.The problem is with the put accounting .That isn't an issue with me.But that is a long winded explanation

    • LINE is relatively highly leveraged as measured by its fairly high D/EBiTDA so won't be able to lever up to fuel growth as much as upstream MLP's with low D/EBITDA, but with LINE's proclivity to drill and the BRY deal that gives unit holders some scope for hope of distribution growth of distribution medium term

      EPD for example has been surging in part because they can now fuel most of not all of their organic growth initiatives with internally generated cash, they do not have to worry about high leverage affecting their ability to tap capital markets (although to date neither has LINE but...) and are also much less dependent on commodity prices (and thus hedges and their associated costs to minimize that dependence and- in the case of LINE's puts, controversy- for ex, do all of LINE's put purchases financed with acquisitions become swaps when the puts expire? If not, then the cost of ROLLED puts SHOULD come out of cash flow??) than relatively highly leveraged, upstream MLP's like LINE

    • Virtually all the minuses are bookkeeping entries that have no effect on cash flow, which is the determiner of distributions. The other side of the coin is that the company, in a given quarter, could have a huge paper profit because the value of their hedges, driven by the spot and futures price of oil, could soar. But it's irrelevant and has no effect on cash flow. GAAP standards just don't account for the way a heavily hedged MLP/LLC functions. Partnerships aren't stocks, let alone partnerships involved with hedging. Concentrate on LINE's DCF. It's okay and will be even better when the Berry deal is completed.

      Meanwhile, we can expect a Linn response to the latest false accusations from last week's shorting hedge fund. Probably tomorrow or Wednesday.

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