During the period from August 23, 2011 through January 10, 2012, pursuant to our equity distribution agreement, we issued and sold through ordinary broker transactions 2,327,815 units representing limited liability company interests for gross proceeds of approximately $89 million. The proceeds were used for general corporate purposes including the repayment of a portion of the indebtedness outstanding under our revolving credit facility. At January 11, 2012, units equaling approximately $411 million in aggregate offering price remained available to be issued and sold under our equity distribution agreement. (That averages $38.23 per unit -RLP)
Units Outstanding after the Offering(1) 195,629,540 units, or 198,179,540 units if the underwriters exercise in full their
option to purchase up to an additional 2,550,000 units.
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately $618 million, or $710 million if the underwriters
exercise in full their option to purchase additional units, in each case, after deducting underwriting discounts and commissions and estimated offering expenses payable by us (based on an assumed offering price of $37.86 per unit, the last reported sale price of our units on The NASDAQ Global Select Market on January 10, 2012). We intend to use the net proceeds we receive from this offering to repay a portion of the indebtedness outstanding under our revolving credit facility.
As of December 31, 2011, we had total borrowings of approximately $940 million outstanding under our revolving credit facility, which were primarily incurred to finance the acquisitions made during the three months ended December 31, 2011. At our election, indebtedness under our revolving credit facility bears interest at LIBOR plus an applicable margin ranging from 1.75% to 2.75% per year, or the alternative base rate plus an applicable margin ranging from 0.75% to 1.75% per year.
Giving effect to the 2011 Acquisitions, our Pro Forma Proved Reserves are approximately 3.2 Tcfe, approximately 37% oil, 50% natural gas and 13% NGL.
On December 19, 2011, we announced our 2012 oil and natural gas capital program in the amount of $880 million. The capital program will be focused primarily on low-risk, high-rate-of-return liquids drilling and calls for drilling or participating in approximately 340 wells in 2012. Approximately 53% of the capital program will be allocated to the Granite Wash to drill or participate in 75 horizontal wells, 23% to the Permian Basin to drill or participate in almost 100 wells, 6% to the Bakken and 6% to the Cleveland play. The balance of the capital program will primarily focus on workover, recompletion, optimization and facilities projects.
actually, they other thing to consider is they would never finance a long-term asset with a short term revolver. The revolver is there to make it easy to make the acquisition, then after they have spent XX amount they will either issue new debt or new units. so maybe it is more accurate to indicate that they have accumulated $900 million on the revolver and they are now converting a portion of those acquisitions to the long-term method of financing them
Bottom line, mgt only does these things if they beleive they are accretive to the distribution. If you trust the mgt team then you are comfortable with these move and make some acquisitions as they issue new units
Some questions above as to why they are paying down the revolving line of credit vs more expensive debt.
A revolving line of credit is a line of credit, meaning you can pay it down and then draw it back up, if you pay off term debt, its paid off and you can't get new term debt without the expense of initiating a new loan. Reality is they decided to increase their "availability" by issuing new units, I'm sure they intend to use this cash for future acquisitons but while they wait to spend the money, they pay down the revolver, it would make no sense to put the cash in the bank and continue to pay interest on the revolver. So while technically it is correct they paid down the revolver, what they are really doing is freeing up availability to acquire additional assets
I don't understand your remark:
<You need to get a clean balance sheet to be able to do your capital program of new wells and any possible acquisition>
Are you suggesting Linn DIDN'T have a "clean balance sheet" before this?
I don't see this SPO an indicator to buy additional properties, they're just getting funds to pay off the GW one.
Obviously there has to be a discount to pay the underwriters and get enough demand to soak up the new issuance of units. 4% or so is a reasonable discount for a company like LINE.
Paying off the revolver does make sense. You need to get a clean balance sheet to be able to do your capital program of new wells and any possible acquisition. More equity also allows for a cerdit metric that makes debt financing cheaper.
An interesting fact is if you run the numbers it appears they are bacisally issuing units equal to the remaining number on the previous program. Do not know but suggest the whining is not productive. We will get a selling price probably later today and LINE will not need to issue any more units for a while. Probably good as the price of NG continues to decline and is likely IMO to hit under $2.50. Liquids and oil should be stable and LINE has good hedges in place.
Oh, yeah - the distribution for Q4 is figured into the price they negotiate. And if anyone should be upset it should be me. I added to my position yesterday. A bit of pain today but long term I get paid.
<At our election, indebtedness under our revolving credit facility bears interest at LIBOR plus an applicable margin ranging from 1.75% to 2.75% per year, or the alternative base rate plus an applicable margin ranging from 0.75% to 1.75% per year.>
Current one-year LIBOR rate is 1.13% (http://www.bankrate.com/rates/interest-rates/libor.aspx)
If they are paying just 1.13+2.75, or 3.88%, it seems a bit foolish to pay this part of the debt off. Just an observation, what am I missing?
very helpful rlp. clambo did make an appropriate observation in my view on why was linn capping the price around $38 last quarter with the dribble out unit offerings; then all of a sudden comes out with this major offering after having capped the price around $38. This major offering is the right way for an mlp to carry out its business model and hopefully they do have a good acquisition in the works. The issuance of equity is typically more expensive than the issuance of debt so it tells me the dribble out method may have been very costly in more ways than one from the unit holders view. You do not even see the major E&P's using the dribble out model for equity so that should tell you something about it.