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Linn Energy, LLC Message Board

  • fcfguy fcfguy Nov 5, 2013 3:45 PM Flag

    Why all the fuss over the GS comment?

    Nothing in the below note is outrageous. It may be wrong, but it is a reasonable assessment with conclusions that follow from fair assumptions. The conclusions may prove to be wrong, but within the scope of a fair analysis.

    However, all this seems to miss the key point of why investors own an MLP like LINE. We own it for the tax sheltered yield, primarily. If the management does a good job, they can extract extra value out of the assets they employ and shareholders will benefit with some capital gains. But, MLPs are a pass-through mechanism, accruing no capital. If they want to expand, they must borrow or dilute current shareholders. No one should own an MLP for capital gains as a primary incentive; for that, you own a C Corp. There are plenty of them.

    Linn’s mechanism for acquiring BRY, LNCO, was a unique approach and opened the door for some pretty smart operators to take advantage of an untested vehicle with lots of “weak” retail holders. The Hedge-Eye report was an analytical coup and served its purpose – kudos to those guys. The massive hedging operations engaged in by LINE, with the accompanying arcane accounting, presented the perfect opportunity for mischief.

    Now that most of the smoke has cleared, let’s look at what we have: the deal will go through, the dividend will be maintained and likely raised in the not too distant future, the BRY assets will allow for a good many years of good cash flows (that’s why the Berry management and shareholders want the deal) and with not much new dilution, the transparency of the balance sheet, cash flow and income statements is enhanced, the company has been vetted by the SEC (with a final decision yet to come, but presumably they (the SEC) would not have signed off on the S-4 if there were major negative announcements pending), and, a new vehicle for making acquisitions has been produced, likely making the next event much less troublesome than this one.
    Through all of this the yield remains around 9% wit

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