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Linn Energy, LLC Message Board

  • rrb1981 rrb1981 Jul 12, 2013 10:35 AM Flag


    It has become quite apparent to even the most blindly loyal Linn lovers (that would be sandonthebeach and norrishappy aka norrisdad) that the Berry deal was more than just an accretive acquisition. It was/is very important to Linn managing to maintain a 1.0x coverage ratio. A lifeboat if you will. Without Berry, and its high quality oil properties, Linn will be forced to either find another large acquisition or be forced to be extremely disciplined with its capital investment and achieve extremely high returns in order to achieve sufficient DCF to cover the distributions.

    I can't believe that Berry holders will approve this deal. I don't believe the accounting foolishness will amount to much. I really don't. The real issue at Linn has, is and will remain, they built a distribution based around natural gas hedges at $8/mcf and they have been in a tail spin ever since, making billions upon billions of accretive acqusitions to plug the shortfall in DCF. Now Linn finds itself in a position where it takes $3-4 billion dollar deals to move the needle.

    Make no mistake about it, Berry is a diamond in the rough. They aren't that well run, at least in my opinion, but their oil properties are quite desireable. Linn is looking to instill some discipline in that organization and capitalize by using the bulk of their cash flow to shore up the DCF holes.

    It will be interestign to see how it unfolds.

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    • Is there any reason for the merger to be voted on prior to the conclusion of the SEC inquiry? It makes absolutely no sense for either BRY or LINE and any talk regarding the current LNCO/BRY pps ratio is irrelevant. chicken... egg.

    • Spam.

    • Unless LINE's stock price improves prior to the vote, this deal may not happen ... I'm expecting a KMI/DELL like Warrant issuance to seal the deal

      • 1 Reply to gebertx
      • With LNCO at 29.16 (and that irrationally high if LINE is at 24.84) and BRY at 41.02, it seems unlikely that BRY shareholders would approve the deal with a 1.25 ratio.
        As you say, unless the LNCO (not LINE) price improves the deal would have to be renogiated (to LINE's disadvantage) or it will not go though. Doesn't really matter if management is still in favor. The shareholders will vote it down.
        Most likely there would be a renegotiation of the terms making it even more expensive/dilutive for LINE.
        Which means the shorts won. A couple of college grads and a computer can take billions in market cap off a company by spreading a bit of FUD and scuttle a deal like this.
        Unfortunately LINE did not have a strong GP which could have guaranteed the distribution and thus prevented this carnage.

    • LINE keeps falling on SA, Barrons and other attacks. BRY has been fairly stable which would imply that trading is purely an attack on LINE and possibly the BRY deal is off (with BRY selling to someone else). If deal is just scuttled, BRY would be initially hit by sellers who want to short it out also. Since BRY is not falling as hard or at all right now, it looks like BRY has another buyer lined up. The crooked shorts may have manipulated LINE / LNCO stock trading to their satisfaction so they could cancel the BRY deal since it is so beneficial to LINE. Shorts would be destroyed had the deal been allowed to complete.

    • RRB most of the analysts making public statements do not agree with you. But that is nothing new as you have a long history of being an unrepentant racists and yet to get one single investment concept correct.

      • 1 Reply to norrishappy
      • The BRY deal stopped the first wave of the short attack on three elements.

        It reflects an increase in the distribution.
        It took away all uncertainty about DCF coverage. Which was purposefully fanned in by the short even as they admitted distribution could be paid at this rate for a very long time.
        It made LINE Oilier and provided access to California shale which is nearly impossible.

        But most importantly it put to bed the concerns of risk adverse individual income investors about a near term cut in the distribution. What the shorts are always timing to inflame without saying it directly.

        The BRY is a good fit for both companies not a super deal. It is important in the near term to blunt the short attack. Which is why the timing of the SEC investigation after all this time is so questionable.

        It could easily have been handled in their deal review which was already responsible for an unusual delay in approving the deal. SEC could have demanded all this information as part of the deal approval process but for some reason took the additional and unnecessary step to announce an informal investigation.

        The SEC fully understanding the unnecessary announcement of an informal review would very likely break the deal which had ended the short attack they should be investigating.

        They really should be investigating Hedgeye's work. Being more than 50% off the work of a very large number of solid market analysts is a strange occurrence indeed.

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