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Linn Energy, LLC Message Board

  • harponhanger harponhanger Dec 27, 2012 12:01 PM Flag

    NGL's a growing unhedged exposure

    RBC in it's bullish 11-30-12 report notes that including NGL's, 74-80% of total production is hedged for 2013 through 2015. 16% of Q3 2011 sales were NGL's at 42$ Bbl- while 21% of sales were NGL's in Q3 2012 at 33$ a bbl.Esimates for NGL's % of production going forward run around 25% of production and maybe by my guess 20-22% of sales.While it is possible that many other outlets for NGL's are in the pipeline ,Line may have a problem in this area going forward. RBC estimates dist of 3.044 and Cov ratio of 1.28 exiting 2013.I'll hold.

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    • The NGL issue will resolve itself, however, it may take several years...in the same way that the natural gas problem will resolve itself.

      Quite a few more crackers coming online over the next 5 yrs that will consume plenty of ethane. We also are seeing record propane exports.

      In 4 or 5 yrs, we'll be seeing record LNG exports. I do believe that NGLs will continue to be a issue that Linn will have to deal with..but only for a few more years. In the interim, it may mean less aggressive distribution increases and higher coverage ratios to account for volatile price swings.

    • "RBC estimates dist of 3.044 and Cov ratio of 1.28 exiting 2013."

      With a 5% dist. increase factored in to a 1.28 coverage ratio, that's pretty optimistic, but I'll be tickled if RBC is correct. However, Linn will have to negotiate a bit of an obstacle course to pull it off, and only one of the potential obstacles is the price of NGLs.

 
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