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Linn Energy, LLC (LINE) Message Board

  • fredrickson01 fredrickson01 Jul 13, 2013 2:12 PM Flag

    A Straw Man - Estimate of IIQ-2013 P&L and DCF

    At the risk of getting slammed by astute members of this board, an estimate of IIQ-2013 P&L for LINE is offered up for reasoned dismantling:
    Revenues = 16 analysts estimates from Yahoo Finance plus 3% = $596.2 Mil
    Lease Operations Expense = up 20% vs IIQ 2013 = $106.4 Mil
    Transport Exp = up 25% with improving % of sales (5.7%) on larger scale = $33.9 mil
    Marketing Exp = no increase vs IQ = $7.4 Mil
    G&A = modest 4% increase = $60.9 Mil
    Deprec, Depletion, Amortization = no increase = $197.4 mil (possibly understated)
    Impairment of long-lived assets = no change from IQ = $57 mil
    Taxes (not income taxes) = Increase of $10 mil = $49.6 mil
    All other expenses = no change from IQ = $5.6 mil
    Total Expenses = sum of above = $518.3 mil
    Other Income (Expenses) = no change from IQ = -$102 mil
    Income Tax Exp = no change from IQ = $7.5 Mil
    Net Income (Loss) net sum of above = -$31.6
    Distributable Cash Flow (simplified) = Net loss + Deprec, Depl, Amort = $165.8 mil
    DCF / Unit = $0.737
    Distribution/unit = $2.90/unit divided by 4 = $0.725
    Distribution coverage by DEF - 101.6%
    Net Income and DCF are very leveraged to Net Income. I assume 16 YHoo Analysts are on the conservative side thus I upped estimate by 3%.
    All critiques of this are welcome, well reasoned and otherwise.

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    • A question about the Straw Man QII financial estimates warrants an answer:. How can LINE pay distributions if Net Income per Common Share (Unit) is small or negative. Answer: Net income is derived from a specific set of accounting standards and guidelines and includes among many other income and expense items, the charging of depreciation, depletion and amortization of long-term assets...These assets were paid for previously as capital investments (e.g., bought a tractor with an 8-year life span, bought an oil well with a 9-year life span, etc.). Because such assets lose value over time, it is REQUIRED by GAAP principles that the loss of value be expensed over time. Please note that there is no cash actually going out the door from such expensing. That's why it doesn't affect cash flow and why to get to cash flow such expenses are added back to net profits. Now, look at LINE cash flow statements for the last 4 quarters. Total Cash Flow from Operations was $649,988. Total Dividends (distributions) paid were $630,299. So cash flow from operations was about 3% greater than distributions.

    • Is this Adjusted EBITDA, GAAP, or Non-GAAP?

      What about interest expense?
      Gains/losses on derivatives?
      Are they selling more assets we don't know about? (Impairment charges)
      Provisions for legal matters?
      Maintenance capex?
      How do you get the huge jump in revenue from first quarter?

      • 2 Replies to rlp2451
      • Revenues are as estimated by the average of 14 analysts shown in YaHoo Finance Estimates of revenue for IIQ and increased it by 3% because I think the analysts are probably erring on the conservative side.
        Gains (losses) on derivatives is assumed to be the same as in IQ at (-$108,370) and would be deducted from gross revenues to get to net revenue estimate = $596.2 million
        Interest expense is included in Other Income (Expenses) and is unchanged from QI at (-$102) million.
        Impairment of long-lived assets is shown as the same as IQ at $57 million.
        Big revenue jump from IQ is per 14 Analysts' estimates of IIQ revenue (plus my 3% boost up as explained above).
        Boost in legal fees would not be material to QII financials. Legal stirrings did not occur until QIII.
        The baseline IQ P&L figures are from Linn Energy's website, April 25, 3012 filing of 10Q for IQ, PDF file.
        I mentioned in initial post that "Net Income and DCF are very leveraged to Net Income." Duuh, I meant "....leveraged to Total Net Revenue."
        Also of note, the P&L is driven for the most part by five numbers, Total Revenue, Lease Operations Expenses, G&A Expenses, Depreciation, Depletion & Amortization Expense, and Other Income (Expense)--which is virtually all Interest Expense. The four expense categories account for about 95% of my $596.2 million QII estimate.

      • dadnorris1 Jul 13, 2013 3:38 PM Flag

        Gains/losses on derivatives?

        Non cash irrelevant.

        Are they selling more assets we don't know about?

        Source of cash

        Impairment charges

        Non cash

        Maintenance capex?

        YOu have to take that from management. No one inclusive of the shorts can calculate it.

        However the independent valuations done by the bry analysts certainly did have access to all the data. Their valuation was $36+.

        What happen missed a dose?

        You have a years long record here of proving you do not understand accounting, economics or investment math. More importantly you refuse to learn and remain as you are.

        Ignorant and angry about it rather than doing anything remotely productive.

    • I will not claim to be astute but immediately apologize to any honest poster of any opinion I might not have given a proper benefit of the doubt.

      I think you are astute and this is the most reasonable baseline assumptions. The wild card as another poster pointed out is the 5% reduction in volume due to infrastructure problems. Issues certainly can be resolved but perhaps not in a quarter.

      But the shorts are working of fear and panic and any DCF below 1 for any reason will have them play longer. As this is all irrational and irrational can not be forecast who know what the unit price will do in the short term.

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