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Linn Energy, LLC (LINE) Message Board

  • norrishappy norrishappy Mar 7, 2014 11:09 AM Flag

    A rational reason to trade down. Which doesn't mean it is correct

    "Ethane, the largest portion of the natural gas liquids barrel, traded down from $0.42 per gallon to $0.33 per gallon. Meanwhile, propane, the second largest portion of the barrel, traded from $1.35 per gallon to $1.12 per gallon. Ultimately, the representative NGL barrel traded down 10% on the week.
    Still, the representative NGL barrel remains up over 25% since lows in June, a medium-term positive catalyst. Natural gas liquids prices were helped by the rise in WTI crude prices, which shot up from ~$95 per barrel to levels of up to $110 per barrel at points in the second half of 2013, and natural gas liquids prices correlate to movements in crude oil prices. Since then, though, crude prices had retreated somewhat, to ~$97 per barrel currently. However, NGL prices have remained relatively robust. One factor in this trend is that the composite NGL barrel has been helped by an increase in propane prices, which has likely been driven by higher propane exports."

    It is not shocking that propane is trading down on warmer weather. The $1.12 price is about a 45% discount to WTI and 50% to brent. Propane of course is priced very closely to oil BTUs everywhere else in the world.

    Which is why export of propane continued despite the price spike.

    Ethane is about $5mcf or about 10% over ngas spot. Local differential between MB and Conway important.

    The strong draw down in natural gas stockpiles is exciting. A hot summer could overwhelm supply again. As could better economic activity.

    NGl prices are still above the averages which produced a very good quarter. Guidance is at $40 for ngls verse $40.40 market. But of course the actual makeup of the barrel is all important and we have no way to know that. The LINe barrel should get heavier (better today) with more oil production.

    If we has a normal American economic recovery LINe owners would see a very different picture and be cheering. Instead we have three more years of churlish and dishonest Obama.

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    • norrisd thanks for all the useful info .
      when I fly and the plane is boucing all to hell I get nervous and imagine the weings snapping off .Then I look for a flight attendant ,when theyre reading and bored I relax . So tell me are you relaxed with line now is it just turbulence on a long flight to bali

      • 1 Reply to colonelflashmanvc
      • Yes I am relaxed but I am also diversified. That said I am a little overweight on LINE/LINCO.

        The payoff I am hoping for is simply this. In time American natural gas and liquids will be rationally priced to oil BTUs rather than insanely discounted. Free markets impose rationality.

        Management is getting back to the low risk / lwo decline / highly predcitible therefore hedgible business model. Drilling cost are coming down and this is a margin business. Oil has better margins until our energy markets are more rational - so management is seeking to produce more oil.

        Obama has done a huge amount to disrupt market efficiency which is not reported. Passive agressive behavior is difficult to describe.

        All is going in the right direction. So I am with you in the plane and reading rather than worrying,

        Best of Fortune to us both.

 
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