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Linn Energy, LLC Message Board

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  • glsimmons3 glsimmons3 Nov 3, 2011 10:40 AM Flag

    PER An Interesting Investment?

    spent 30 mins posting reasons to research SD prior to jumping into sdt or per and yahoo did not post... so here goes the short version:

    i was a long term sd holder as well as sdt trader and took my largest loss in over 10 years on SD when i finally lost faith in Tom Ward and the SD game plan.

    research the perspectus, in particular the hedges, hedge prices, oil price assumptions for future divi payout, and the number of shares held by SD that they will sell in the near future when certain obligations are met.
    research SD, in particular: their past and tom wards past... he is from chk where he an aubrey started chk... ward is a high risk taker, and i mean one of the highest in a high risk sector... ward loves risk and carring alot of debt... often compared to a drunken sailor on a weekend leave...
    don't get me wrong, SD has some good holdings in the mississippian and now new mississippian (low cost drilling w/ decent production numers) as well as older holdings (well proven) in the permian and various NG plays... ward is now selling off in trust/jvs and sells.

    i'm not a SD/SDT/PER basher or ward basher but as LINN longs i'm asking you guys to do a little extra h/w on this one...
    after checking the trust perspectus be sure to check SD's past conf calls as well as wards various media hits... please take a second and look at SD/Wards past w/ chk and the huge investment he made w/ NG prior to the NG price crash and what that did to investors, check the SD debt situation and how the production never seems to reduce the debt, check the revenue increase and how it relates to the eps performance, then check the eps performance and how it relates to wards compensation... do your homework on this one guys and remember the trust is only as good as the operator...
    if i were getting back in Wards playground i would not take the risk for the 10% divi when SD will either soar with higher oil prices (100+) or crash with lower oil prices... and i mean crash hard if oil falls below hedge prices for any period of time. i would roll the dice and buy SD and hope for higher oil prices and either ward to slow his spending or some sort of buy out...

    i do not invest in any company that i can't get behind the management team and that's the reason i exited... please get comfortable w/ wards plans before investing in these trust...

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    • add to my SD/PER/SDT concerns... earnings just out for sd and they are now reducing production estimates for 2011 to 23.4 million barrels of oil equivalent (mmboe) from 23.9 mmboe, SD reports shortage will be seen primarily in oil production... SD earnings did break out of the red beating estimates of 0.00 buy 1 cent... eps of .01 per share.
      reported vs. estimates avg.
      - O&G $319MM vs $321MM
      - Total Rev $364MM vs. $368MM
      - Oil Prod 3,192MBoe vs. 3,124MBoe
      - NG Prod 2,989MBoe vs. 2,883MBoe
      - Total Prod 6,181MBoe vs. 6,009MBoe
      - Avg MBoed 67,359 vs. 67,200
      - price per Boe $51.52 vs. $52.17

      Ward reduced 2011 full year production guidance in oil... stated that drilling cost were rising for various reasons (moving rigs in the miss. and other drilling cost. also noted underperformance in Pi�on/GC areas as cause of oil production shortage... odd those areas in the past were strong ng producers...
      careful with sd/sdt/per... listen to the c/c call friday a.m. and get a feel for ward prior to jumping in these trust... gl

    • jackhiller Nov 3, 2011 11:43 AM Flag

      Grady and Glenn, This mb owes you for helping to explain the risks to the obvious yield rewards. There is much complexity to careful investing. Formula thinking does not work. Our eyes and then minds glaze over those long laundry lists of things that can go wrong--but those things can go wrong, as Grady (and money) pointed out.

      Today, on behalf of Crammer, the internet carries his analysis that LNG (CQP's parent)is debt ridden and never makes a profit, so it should be sold. Not one word that the debt situation reflects the start up status of the LNG export business, and that the stock popped because LNG had signed a large, long term contract that would attract financing for completing the LNG export facility, and then creating a high profit margin business.

    • Fair enough...there is risk as you say.
      As for oil prices, I expect most of us who invest in this sector are expecting oil prices to trend higher over the next 2 decades (life of these trusts). They are hedged for a few years and people investing at the beginning may have received much of their investment back by the time the hedges roll off. After that the income will depend on oil prices as well as SD's ability to fund capex (especially at the beginning of the trust life when most of the drilling will be done). And if SD gets bought out, the trusts should go on under the new sponsor. It's a risk I think is worth the potential reward and I note that I will have got 8.5% of my original SDT investment back in just the first 2 distributions (ie. in 6 months).

      In any case, I would rank SDT and PER considerably less risky that either Petrobakken or Cheniere to mention 2 investments Jack is now touting while at the same time advising everyone to avoid risk at all costs.