I'm changing my mindset about the LINE/LNCO/BRY merger from the thread I posted yesterday under "Still perplexed." To prep myself for what I'll be looking for and comparing to in Monday's release I went back and reread the subject article. I'm a former finance guy and frankly, I think Mr Shih is spot-on in his analytical interpretations of the sustainability of LINE's dividend, as well as being quite undervalued at current price even without the BRY merger. Based on my own initial shock from seeing an almost $3.00 drop from Tue high to Fri close, I believe it's quite probable that too many retail investors, like me, who have agonized over the depressed value and extreme volatility in LINE, have forgotten, not fully understood, or not seen the mathematical logic in Mr Shih's valuation of LINE excluding BRY. It helped me immensely to review his factual interpretation once again. Consequently, I change my position of Fri that bad news will be forthcoming next week. The most important news for me, my intention being to hold my LINE position for the long-term income it provides, will be whether the improving operating results management anticipated for Q3 have begun. I also now consider the lack of an accompanying conference call likely due to an expectation of imminent news of the SEC decision, and what will probably be a joint LINE/BRY press release. It just makes the most business sense. The 25th date also more closely matches what has typically been the approx. timing of LINE's earnings releases before this SEC non-public inquiry was instigated by some very aggressive short interests with the aid of the Barron's newspaper reporter. There's allot of fear swirling around LINE, and I believe it is unfounded. An MLP buying a C-corp - maybe the SEC just wanted to establish some reference points/guidelines on how to evaluate future deals of this type. No financial restatements. LINE hasn't mislead investors. LINE is a solid best-of-breed E&P MLP.
I hope you're correct, but my spidey sense is tingling . . . trouble ahead. In my experience, silent has seldom meant good.
As I've said before, we really need a business service that would act like private investigators, to stake out and follow top management. One could learn a heck of a lot from knowing who they met with, where they traveled. For example, if a team of litigation attorneys suddenly showed up at BRY's offices, and they burned the midnight oil through chinese and pizza deliveries . . . well. Wonder if that's legal? I mean, it's not private information, who goes where on public sidewalks and streets. Let's see, Seattle to Denver, a hotel room, rent a car . . . hmmm, what am I doing next week?
my spidey sense is flashing serious red... so it goes down, imho. but... if no deal... at what price is LINE a buy? $22? $19? coverage ratio is small... is it operational? can they tweak operations and keep paying out... or do they absolutely have to make acquisitions to keep the current rate of distribution?
Ruby, I was a retail broker with Merrill Lynch in the 80's when the Marathon Oil takeover of Gulf Oil was uncovered by a nosy investor who spotted Marathon's corporate jet at the local County Airport and put 2 & 2 together. True story.
Given that Mr. Shih used the fourth amended S-4, and the fifth amended one changes the verbiage that Mr. Shih depended on, I'm not so sure what he wrote is still pertinent.
One would have to go through the changes in the latest S-4 to know if what he postulates still holds.
Here are the pertinent page references by document: pages 235 - 237 in the 9-18-13 S-4A and pages 233-235 in the 10-22-13 S-4A. The changes are descriptive only. Incidentally, I thought "Maintenance Capital Expenditures" had a clearer meaning being that portion of total capital expenditures needed to "maintain" existing producing wells. I genuinely do NOT see why the SEC thinks "Discretionary reductions for a portion of oil and natural gas development costs" conveys greater understanding. However, in my opinion and as highlighted by Mr Shih, most significantly on page 237 and 235 respectively, the coverage ratio under the new SEC changes is .99. It seems obvious that the previous method by which LINE calculated "Distributable Cash Flow" was MORE conservative at .89 than what the SEC has called for. Makes me wonder how the SEC is "protecting investors" with their changes. Fascinating!