I own 6000 shares of LINE.
My take is that during the year EVEP has issued shares several times and next year that dividend is going to be paid to more shareholders with the same earnings.
LINE has issued no shares this year and management has indicated that it would buy back shares rather than issue new shares. LINE indicated that is has borrowing power and cash from sales that have been sheltered by write offs to fund purchases.
I wonder if EVEP will decrease the dividend or if they can drill quickly enough to ramp up income? The problem is new wells are not hedged and todays hedge price is very much under the old hedges.
I think LINN Energy has a stronger hand to play evidenced by the fact that no stock issuances have been required during the last year.
I am looking for good investments and frankly think EVEP has run too much. If it retreats during the next quarter back from where it came I would buy in the 19-20 range.
I believe the wise investor dumps EVEP after the run and buys back 10-20 lower during the next 1-2 quarters.
Mark Ellis, who is taking over for Linn, also has a very good reputation. He is supposed to be more knowledgeable in the nuts and bolts of oil than Linn.
I wonder if the industry sentiment will change once Linn is out of the picture and Ellis takes over. According to everything I have heard Ellis has a good reputation in the industry.
Walker (of EVEP) is also very good.
Linn is split almost 50/50 - oil and gas. EVEP is almost all gas. To my mind that makes EVEP a bit more speculative in the current environment. I own both.
I bought 3k of each of these energy stocks 2 months ago. I love them all. All have made me good solid returns. Great dividends.
Vanguard Natural Resources
I have considered investing in both and appreciate the rational discussion. It appears to me that the dividends on both are quite secure for now even though a lot of the earnings seem to be based on management's hedging skills. I have no expertise in this industry but at current natural gas prices, it sure looks like a good time for these partnerships to be investing in added capacity. Am I missing something?
Now I have to get past the unpleasant thought of completing K-1's.
Well, you see that LINE is issuing shares. Wonder if that makes you somewhat skeptical of their announcements not to issue shares, or was that something that you read into. The MLP model is to pay out most of your cash to investors which requires that you issue equity and debt to raise the funds to grow your assets.
I think it's perfectly fine to compare the two companies to try to determine which may have better value or you could just own both as many do.
I'm familiar with LINE, but since I don't own it, I haven't followed what they did as for funding, issuing equity or debt etc. I had read that they were 100% hedged for a few years out.
I could be wrong, but I thought that when EVEP makes an acquisition that it is already cashflowing, therefore reducing the time delay. They will still have the timing mismatch from having issued equity near the end of a quarter (in which case the shares get added to the share count and earn the distribution from the previous quarter's flow) while the money has just started coming in yet from the acquired production.
It is also true that any new hedges put on this acquired production may be at lower strikes than older hedges, but I believe the hedge prices are still greater than the current spot market. If EVEP believes that prices will bounce up, they could always elect not to put the hedges on at this time (during low prices) and thus get the benefit of any increase in spot prices.
I don't mean to criticize LINE, but EVEP could perform perfectly well by issuing equity now when its price has risen substantially in order to acquire cheaper production when nat gas prices are temporariy(?) low. If nat gas prices rise, LINE's share price may rise and they may then be able to issue equity (or borrow), but they may also have to pay more for their acquisitions.
The market likes it when companies make smart acquisitions and don't like it when the risk of overpaying increases. The fact that EVEP's share hasn't declined in the face of 2 big equity raises could mean that the market is confident in their ability to make accretive acquisitions.
There are good reasons why the market likes EVEP
l. While several insiders at line have been selling shares, John Walker and his people have been buying.Moreover, Walker is a major shareholder in the company whose interests are closely linked to those of the investors.
2.Again, evep investors benefit from evep's sister company that does exploration and development and has had a very impressive track record. Walker like Duncan gets very high marks for his level of shareholder friendliness. The line senior management is very good. No doubt about it and I own equity in both.That said my feeling is that evep in the long run will do much better for shareholders because Walker 's interest's and shareholder interests are very closely linked. shares of both firms is a good idea, I would weigh the percents toward evep.- just one investor's views.
p.s. if you check around within the industry you will also find that people prefer to do deals with evep-not sure why. best sc4
I own large positions in both. I'm tentatively planning to hold them for five to ten years for the dividends. I figure that whatever they do with dilution, in five years all forms of energy will be significantly higher. I just hope that in the interim they don't do anything that forces them to cut the dividend.
Management of both companies seems pretty sharp and I'm gambling on no cuts in the dividend.