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Linn Energy, LLC Message Board

  • saldon63 saldon63 Dec 5, 2013 12:46 PM Flag

    Stock pop on merger news


    Does everyone on this board expect a stock price pop when the merger is officially announced? I don't see it unless there is a forward looking statement concerning a definite dividend increase. What do you think?

    Sentiment: Buy

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    • Not surprised if LINE climbs much higher post BRY deal closure. MCF rose 25% post closure of Crimson deal where MCF got more oil weighted. Same premise as LINE/BRY deal, so expect climb up to and after deal closure.

    • I can't believe that it isn't "popping" now. Odds are that this stock will go up, so why on earth are people selling now? If you haven't bought more yet, you had better buy on the dips. You won't see this below $31 for a long time, if ever.

    • If it simply stabilizes the price around 31, I would be happy. The monthly payout is extremely nice without a raise. My worry with LINE has been a return to the mid 20's. I think those days may be over for awhile.

    • I think we will see a $2-3 pop for a few days leading up to the merger announcement. I think there will be a selloff after and another smaller pop if and when a dividend increase is announced. I'm anticipating a dividend increase to approx.$3.05, which was there original plan.

      Sentiment: Hold

    • Judging by this pullback, I suppose we should expect a gradual response. Probably the best thing for LINE is simply to be out of the news for several months. But I do think you'll see a distribution increase pretty quickly after the deal is closed, my estimate is $3.05.

      • 1 Reply to ruby.thedyke
      • Ruby,I've only been here couple of years but what we have just gone through I think Linn will have to do it the old fashioned way.They will have to earn it to get rid of the baggage of mistrust.I'm happy if they err on the conservative side.As we all know with the increase in the oil patch and the refiners enjoying a slight glut.A little cushion of the 1.15x coverage is a little southern comfort methinks.

    • Linn will certainly not be ready for a financially responsible distribution increase until . . . I don't know. Maybe not even until 2015. I'm in LINE for income, but, given my druthers, I'm hoping they hold off until they can have about 1.15x coverage post-dist. increase.

      Re a pop on a merger, I think that practically everyone here expects one, including me. However, so much agreement (if my take is accurate) gives me pause. Maybe we'll just get a poplet. On the day before the meeting, though, it wouldn't surprise me to see the units push close to or a bit beyond 32 in anticipation. In any case, should the deal not go through, that could mean a few downside points in the short term..

      • 2 Replies to ronharv
      • ronharv, how was your math back in school?

        On your comment:
        "Linn will certainly not be ready for a financially responsible distribution increase until..."

        Did you miss this MF article?

        Is there a math error somewhere?

        "Better cash flow
        While reiterating its production guidance is nice, the real news is that LINN expects its cash flow to be 5%-10% above its distribution. That's a lot better than the previous expectation, which had LINN paying out every dime it made to investors. Basically, this means that LINN's distribution coverage ratio will be up to 1.10 times on the quarter instead of 1.0 times. It's also well above the worrisome first quarter showing of 0.88 times that started its year off on the wrong foot.

        Two factors have contributed to the excess cash flow this quarter. LINN is seeing better realized prices for its natural gas liquids, while its operating expenses are falling. The one-two punch of higher prices and lower costs is the perfect recipe for higher profits and exceptionally strong distribution coverage.

        Merger update
        LINN's great fourth-quarter could be even better, as it expects to close its merger...etc

      • I would not be so sure of no increase.

        Current coverage guidance is 1.05 to 1.1. BRY will be cash flow accretive. A good portion of the higher prices was better than originally market assumed results.

        The leg of valuation the shorts took away from LINE was clear visibility of accretive acquisitions. The unit price is low so the cost of equity is extremely high. Of course making it far more difficult to do accretive deals.

        What the new guidance proves is LINE is not broken. It did suffer a short attack at the instance lady luck #$%$ out on ngls and HS Texas. Likely no coincidence. Management did lose focus operationally and that brought on the next leg of the attack.

        With the analysts in show me mode as result, the gains which are likely from 'high grading' capital investment to BRY assets like Sand's Permian do not seem factored in to the unit price. It really is not all that far fetched that with an organic cover of 1.05 and an immediate add from BRY LINE will be nicely over 1.1. Kick in real visibility on the more oily investments by the end of the year.

        Propane is not looking back on export. Heavier ngls used in gasoline blending are greatly helped by a limited measure of acknowledging the physics of reality with wholly defective corn ethanol corruption mandates.

        There are many moving parts here. But most are more likely than not to move in a self supporting virtuous cycle. A secure coverage ration is critical But so is the signalling power of distribution increases in valuation.

        I would not be surprised at all if there was a 5% increase towards the end of 2014. But I would not set any odds on it until after the merger is complete and we have some visibility into the capital budget.

        Best of Fortune all.

    • I think it will just relieve some reservations, which should allow the price to increase another 10 to 20% or so.

0.180.00(0.00%)May 23 3:59 PMEDT