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Linn Energy, LLC (LINE) Message Board

  • opinionsarelike33 opinionsarelike33 Jul 12, 2013 2:24 PM Flag

    Why is scuddling the BRY deal

    such a big thing for shorts? Who cares if the deal goes through. What do they gain by stopping the deal? This part doesn't make any sense to me.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • shorts want to destroy LINE. As others have stated, LINE might survive not getting BRY but it will hurt LINE and would make them pay more for some other company the crooks might have as a long position (or perhaps even are long BRY and would get more money from a renegotiated merger deal). Who knows what the motivation is in the minds of those evil people

    • Its a pairs trade, long BRY, short LINE under the assumption that if the deal does not go through than BRY will go up and LINE down. Only time will tell whether they are right but short term, these are high frequency traders, own in the morning, sell in the afternoon, then repeat the next day.

      Sentiment: Hold

    • Why is it important for the shorts to kill the Berry deal?
      Berry is the lifeboat for Linn. Linn is struggling to maintain 1.0x coverage on DCF. With Berry, they are buying a company that was clearly undervalued by the market due to poor management, but happens to produce a significant amount of discretionary cash flow and can be "easily" pulled into the fold. Berry generates enough cash such that it will self fund the distribution on all of the units that will be issued, plus there is additional cash left over (accretion) to allow a 6.2% bump from $2.90 to $3.08.
      It also brings a tremendous number of PUD oil locations into the company, where Linn can shift the bulk of its maintenance capex to, where returns should be much higher than gassy and ngl rich fields. Aside from low cost, high return workovers and recompletions, oil plays are offering the best returns. Right now, Linn isn't resource limited, but they need more high IRR basins in order to maintain production/cash flow. They were forced to abandon the Texas side of the Hogshooter due to poor results. They moved to the Oklahoma side, where results have been much better, but Linns working interest is lower, so they get better overall returns, but they cannot put as much capital to work. Other than that, the Permian is really the only major basin where they are operating that has a lot of room to run. The Bakken offers nice returns, but they just aren't there in enough scale for it to be anything more than icing on the cake.
      The other issue is that the Berry deal was an equity transaction (with assumed existing debt). This deal allowed Linn to clean up its balance sheet, which had become horribly bloated. The deal would push them back towards their self imposed 3.0x limit (that they conveniently stopped talking about as they pushed towards 4.0x debt/ebitda!)
      So, if the shorts cause the Berry deal to collapse, it won't be a death blow to Linn, but you can bet they will be on the prowl for oily properties soon.

      • 3 Replies to rrb1981
      • I agree with all the points rcp makes: the lack of DCF coverage, the need for oil which is what produces the revenues and funds your distribution, the leverage, and the dumb acquisitions from BP. The BRY acquisition fixes them all. Linn really needs BRY. I also agree with rcp that it is not a death blow if BRY does not happen, but Linn will have to start making good (oily and low decline) acquisitions with better revenues. I am not impressed with Ellis.
        Ruellia

      • So, if the shorts cause the Berry deal to collapse, it won't be a death blow to Linn, but you can bet they will be on the prowl for oily properties soon.

        That is why it doesn't make any sense. Not really anything to gain by collapsing the BRY deal.
        I think everyone is looking at the wrong side of this. The main reason for the SEC is the puts and how the cash has been used up till now. I don't believe the shorts care about the BRY deal between Linn. They are more interested in bringing Linn down because of book keeping and cash allocation.

      • Distribution certainty our resident unrepentant racists.

        Short operations live and breath on fear, not reason.

        I would note try mighty as they surely are, the shorts are not being able to generate the appearance of market efficiency and ordinary function in the relationship between LINE and LNCO.

        Plus the BRY deal did drive them off mumbling last time.LINE was right back up to the high $30.

        Something a thinking person would have already thought about.

 
LINE
31.58-0.14(-0.44%)Sep 2 4:00 PMEDT

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