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Linn Co, LLC Message Board

  • fish.andchips fish.andchips May 22, 2013 6:58 AM Flag

    3 questions for the board

    What would/will happen to the stock:
    1-If the price of natural gas went to $3 or $6?
    2-When we go to monthly dividends payments?
    3-When liquefied natural gas plants go into production to ship the gas overseas?


    Sentiment: Strong Buy

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    • 1) Linn would generate more revenue, which likely would lead to an increase in the distribution. But, it won’t double due to the hedging – some hedges, 70%, lock in a price or price corridor, the remainder, 30%, remove the downside but retain the upside. This 30% would allow Linn’s revenue to participate in the price appreciation of NatGas.

      2) There would be less of a run up before, and sell off after the distribution “ex” date. Therefore the volatility of Line/Lnco would decline and therefore be dominated by a combination of operational developments and an occasional B/S Barron’s article.

      3) If LNG affects the price of NG, see answer # 1.

    • 1.) Not very much since Linn is hedged out 5 years
      2.) No difference
      3.) No difference

      • 1 Reply to rlp2451
      • robin0635 May 22, 2013 5:54 PM Flag

        rlp: Is it possible for you to ever agree with someone who is factually correct in their answer to a cognizant question??? beemerxi is directly on point. and you know he's right....
        re #1) - You know specifically that a hedge removes downside risk and allows a profit if the commodity rises in price - and yes, the profits are capped at a certain level, but it definitely adds to the bottom line, so yes, it would make a difference if the gas price went up...
        in re #2) - you know a monthly dividend would reduce volativity and minimize the quarterly play on a dividend paying stock... (You have played the divvy game just like others and myself have, so yes, there would be a difference...
        in re #3) - as per beemerxi - see #1 - if increase in demand occurs, a reciprocal appreciation occurs..
        Why the need to be so negative??? The very idea of a hedge, which you find so negative, is an insurance policy against market volativity going south....

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