Sandra, Linn made pretty clear that they would have virtually no growth this year and their DCF will be barely 101%, well under their guidance. I think the company will be doing good to simply maintain the current distribution. Those who think a dist. raise will be forthcoming in 2014 are allowing their hopes and self-interest to outrun reality. So I believe that everyone who reads the CC transcript as well as their financials will be the somebodies who know something. The overpayment for Berry are the chickens coming home to roost.
The company based the DCF on baseline production and hedges. The Permian (Wolfberry to be more specific) is the "wild card". It remains to be seen if they will monetize, JV, trade for existing production. It also remains to be seen how long this will take, if it will be done in parcels or as one whole package.
It is similar to EVEP monetizing the Utica acreage. It takes a lot longer than people realize. So, I think at minimum, you can expect a flat distribution, depending on when/if they monetize,exchange,farm out orJV the Wolfberry, you will likely see some potential for upside, but it also depends on timing. If this happens in 3Q, it likely won't impact the distribution in '14.
If nothing else, the company getting off the treadmill and slowing down the average corporate decline rate is a huge improvement. It's what the analysts have been concerned with for some time and now is being addressed through reduced drilling, but may be further assited by jettisoning high decline existing production and PUDs for mature long lived production.
"Sandra, Linn made pretty clear that they would have virtually no growth this year and their DCF"
Completely wrong. The Permian/Wolfcamp was not included of guidance. So 101% coverage is base on a lower drilling capital base.
LINE is transitioning the high value/high capital intensity, high delcine Permain assets to conservative low decline assets with much more predictible production and cash flow.
As noted over and over again the 101% coverage did not include the very real appreciation in the Permian assets. This very ver appreciation is now the 'bank' to buy dependible DCF generating assets.
Poor Ron^3 is once again mouthing the short attack in his normal low information condition.
LINE is once again in transition which the analysts can not model. The price they will reciever for Permain and the assets they will buy are not known. However the makret prices at both ends are very, very favorbale.
Any c-corp acquisition would be instantly accretive. So like the original terms of the BRY deal; before the LINE owner Obama SEC tax for corny capitalists, likely to come with an increase on closing.
Would not plan on it. Nor should it be ruled out. The good news for income investors is LINE is getting back to the income business model.
THERE ARE UNKNOWN UNKNOWNS; THERE ARE KNOWN UNKNOWNS; THERE ARE KNOWN KNOWNS; BUT, THERE ARE NO UNKNOWN KNOWNS............Defense Secretary Rumsfeld said something like that....mind boggling.............I own LNCO.........I think that it is a great place to park money.....the merger/buyout of BRY will sustain coverage for divs and they will increase divs sometime this year......not a bad deal!!!!
". . . and they will increase divs sometime this year" So you seem to ignore the need to raise the DCF for financial stability. How do you think the market would react to that? And what would S&P, who has stated that Linn is overpaying on its dist., do to Linn's already low-rated bonds?
There is a secure distribution of more than 9% free of federal taxes. More oil and gas will be produced in the future. And as others said, today is ex dividend so $.25 was taken out of the price. Each month another $.25 will be in your pocket tax free. I like it.
Sentiment: Strong Buy