Oppenheimer put out a $23 price target today. Even without BRY or anything else improving, which it will, LINE can afford to fully cover a dividend of $2.60 annually. Yes, cut the dividend 10% and this whole temporary DCF/distribution coverage scare goes away.
What do we end up with? $23 stock with a $2.60 dividend. That is over 11% and that is pretty much the worst case practically speaking.
Oppenheimer analyst Bernard Cohen downgraded LINN Energy to Underperform from Perform. Cohen wrote that the company's lower than expected second quarter EBTIDA and weak second quarter production, reported yesterday morning, were the main reasons for the downgrade. However, he added that it does not appear that the Berry Energy deal will proceed under the previously agreed upon terms.
Based on what? He's doesn't have a clue. I'll believe Goldman with their $32 price target as they always have better information - especially when it comes to what the SEC is up to. They've owned the SEC for decades.
Some 24 year old analyst has to attend a meeting where his/her boss will ask about Linn. The analyst will be able to say, "We've just cut them to "underperform" and reduced the price target". The boss will smile and nod at the analyst and go on to the next stock. Its all BS. These analyst are not proactive, they react to the market. Its a trained monkey job, that pays well.
Prudent action by management will be to cut the dividend to 20c pm. It may hit the share price , but i think this has alredy been built into the current $24 range. IF bry deal goes through, they can always raise guidance and the dividend.
Yea what a great way to reward individual investors that have stuck it out and taken a beating still believing in the LINE team.
The signal would be that management can not grow out of the coverage miss.
Together LINE could well go below $20. Further disrupting their cost of capital and borrowing options.
Sweet Willie the expert! Just ask it.
The element of time should be here.
Management does have the assets to cover the distribution even with American energy markets wildly disrupted by government policy. Blocking export, corn ethanol, EPA scaring off investment, Obama blocking infrastructure.
This is an economic hole or void which takes massive amounts of political force to keep a free market from filling.
SO if LINE buys time just meeting the distribution there are long term catalysts to value.
BUt while I am a long term bull this quarter has shaken my confidence in near term execution of management. They are going to have to show me now.
I will take it and buy more after todays sell off. It wasn't a great quarter, but it also wasn't worth a 10% sell off past two days. think of this as a gift. Plus the SEC is an inquiry and not an investigation, must people tend to forget that. Two totally different situations.
I'm going to wait a bit, see what happens next week (or later today). I already hold trading positions I bought this low, I'd love another shot a couple bucks down. Even if all this squashes the Berry deal, a year from now this will be in the $30's, and you get paid to wait..