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Linn Energy, LLC Message Board

  • venturabay venturabay Sep 6, 2013 3:51 PM Flag

    Wells Fargo

    Wells Fargo's monthly review of upstream MLP's
    select info for LINE

    The NGL composite price (Mont Belvieu) also increased in August and is now up 24% since 6/30/13 (i.e. to $1.04/gallon)
    LINE's production mix
    Ticker….(MMcfe/d)........ % Oil ….…...% NGLs….. % Gas
    LINE………….867……….25%.............19%.............. 56%
    Wells Fargo's implied..DCF coverage ratios
    LINE…... 0.84x…..... 0.94x……...0.97x

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    • Venturabay -- Can you tell us what the source is for the Wells Fargo MLP report on LINE? Pretty important to know if the August production figure is solid.

    • Ventura, good find.. Do you know source of WF numbers? Does Linn issue monthly production data? If so, do you know how we can get it?
      Here's what I take from the LINE August production...A very simple, and therefore vulnerable, analysis...
      LINE produced 798 mmcfe/d in Q-1 and earned DCF of $150.5 million.
      LINE produced 780 mmcfe/d in Q-2 and earned DCF of $152.1 million
      With August production of 867 mmcfe/d and up 6% over reported July production of 815 mmcfe/d, one might estimate September production up 3% over August at 893 mmcfe/ avarage mmcfe/day for Q-3 of 858. Simplistically, Q-1 DCF per mmcfe/d was $0.1886; Q-2DCF per mmcfe/d was $0.1999. Assuming no improvement in the ratio from Q-2, one could estimate Q-3 DCF of $167.3 million and with a Q-3 distribution of $170.2 million ($.725/unit), you get coverage of .98. With a slight 2.5% improvement in the ratio vs Q-2, you get DCF of $171.5 million and coverage of 1.01. Lots of other elements needed to refine this studd...production mix, revenue per mmcfe for NG, oil, and NGLs, gains/losses from hedges, operating enpenses, etc. Net, net, is seems to appear that LINE MIGHT be setting up for a nice Q-3.

      • 2 Replies to fredrickson01
      • fredrickson01,
        I think you put more work into figuring out Q3 DCF for LINE then Wells Fargo. Your assumptions are based on LINE's report of August production showing a ramp up in production, hence an increase in Q3 DCF. It appears from reading thur WF's numbers for LINE, that WF is taking Q2 results seriously and punishing LINE. Which WF and all stock analyst can rightly do. LINE management must step up and produce better results in Q3, or else.... I can always fire management by selling my shares!!!

      • I think you are setting yourself up for disappointment if you think LINE will be near 1.0x coverage in Q3.

        Management already gave a projection that was near .90x or .91x

        Now, I will grant you that management might have been sandbagging. I mean, I wouldn't blame them to underpromise after they botched the Hogshooter (that funny word again sandforbrains).

        But, I am looking forward to the next conference call..

    • Implied coveraged based on higher NGL prices is not much different...
      Assuming crude averages $107 per Bbl AND NGL barrel averages $1.04 per gallon vs.
      the old base of $96 for crude and $0.95 for NGL

      Q3'13E.... Q4'13E ....2014E
      0.85x....... 0.94x ........1.00x
      per cent increases in DCF
      2%......... 0%............ 4%

      • 1 Reply to venturabay
      • Actually on propane alone it is very significant. So I am have some trouble with the q4.

        Especially as propane remains on a tear. Around $0.92 August to around $1.20 today. The ngl mix itself look a little thin. Perhaps due to assumptions on ethane rejection. So on the propane alone at current 'market' price we are looking at a pick up of between 1% and 2% for the business in q4.

        The WF is a strong analyst. Given how fast heavier ngls are moving and propane in particular the, timing of the numbers is very important.

        We are in September now but soon we will be going into propane season.

    • Does Wells Fargo factor in the Berry deal on 2014E?

      Presumably not. It speaks volumes about how wreckless Ellis got with goosing the distribution at the expense of a strong coverage ratio. Foolish, absolutely foolish especially when they knew such a large portion of the DCF was derived from NGLs which were not hedged.

      • 1 Reply to rrb1981
      • Board racist rrb'd.

        Rather than being noddy and useless perhaps the question is does the analysis include the recent 22% increase in a 'barrel' of ngl?

        Specifically propane which should be a higher than average % of production mix. 38% off the June average price?

        Would you like to show the board you can do rough math just of the most likely contribution increase in revenue and therefore DCF?

        That is the thing about collectivist racists. When they do not repent they remain deluded therefore illogical and therefore effectively ignorant.

        Simple logic. ;-)

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