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Linn Energy, LLC Message Board

  • legalbark legalbark Jan 25, 2014 6:55 PM Flag

    True facts of LINE Hedging

    I earlier posted about LINE's hedging and whether a rising price of natural gas would give rise to an advverse "mark to market" problem. I received many responsive posts that were most helpful. Probably the best one was the one that referred me to LINE's slides on it's own website. I went there and discovered they still have puts (about 20-30 percent) but swaps are the predominate method of hedging. This means "mark to market" is not the problem I thought it might be ( LINE ignores GAAP accounting so it's really irrelevant) so I'm comfortable with my investment. Thanks for all the helpful responses. GLTA

    Sentiment: Buy

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    • Then compare what LINEs puts % was before the article. Why Ellis said he wasn't going to buy anymore puts.
      Notice what I said buy anymore instead of doing away with puts. Once the puts run out. What will LINE do then?

    • Legalbark

      The part still missing from the earlier discussion which is also important is expressed in the last line of my post (below) from 2011 about Linn hedges.

      The important question that no one has yet addressed is:
      what it the percentage of the current Linn production that is Natural Gass Liquids?

      Back in 2011 it was 17% of the entire production.

      Since then Linn has bought the Hugoton & Jonah gas fields from BP, they Bought BRY, they also bought a few other interesting things that all would possibly change that NGL percentage of the total production.

      if you want to get some idea about the Linn-potential increase in profits that is more complete than just understanding the added profits as prices go up above the PUT prices in the Linn hedges-derivative-mix.
      ….then you would also want to look at the non-hedged NGLs increased prices for the natural gas liquids…………. since prices have been rising and then estimate the gains using an updated percentage for NGLs…and since they are not hedged, they would have a direct benefit as prices go higher.

      Total production (production now shown on the Linn slides is at about 180,000 boe/day), but I really have no good idea on the current NGL-percentage.

      Here is a copy of my old post:

      “Jul 19, 2011 1:16 PM
      I asked about the hedges......If you want some detail, (281) 840-4110 Clay can explain them very well.

      There is a 30% upside on profits for each dollar Oil goes up above their 2011 avg hedge prices as shown on slide #3 on their hedging update. The other years & the nat gas are also shown on that slide.

      We both did not include their 17% from the Natural Gas Liquids which are unhedged and they are now benefitting from.”

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