Xule4432 - Amazon "ships for free" in their invisible "Amazon Sleighs" using their "Amazon Elves"...........LOL
Price overnight delivery to from NY to UT its much more than $25.
Sorry - I did the math wrong. You would only receive 5-6 shares of SYF for every 100 shares of GE you own.
I think both stocks will fall off after the deal is done.
SYF will fall off sooner due to all of the new shares available (increase supply starting this week).
GE will take longer to fade due to GE shares being tendered which will reduce supply starting tomorrow. Offsetting this, starting tomorrow, GE shares lose the "option value" they had before the tender offer expires.
By spinning SFY, GE will see a net reduction in EPS though, so that is a negative for GE. GE has already planned that they can offset that earnings reduction though for awhile anyway. So that will create a smoke screen for a few quarters anyway.
I would expect a decline in both stocks from these levels.
I mean, you could have bought SYF before, so why would anyone suddenly want to buy now? Only due to lower price?
If you didn't like GE before, why buy now after the tender option expired?
I see no compelling reason for new buyers to come in right now for either stock.
You are missing the fact that if GE gave you your SFY shares, you would only receive about 18 shares of SYF for each 100 shares of GE you own. This is about the same ratio as the exchange ratio 1.0505 (118/100).
LINN Cost of NAT GAS = $4.75/MCF (Which includes $1.88/MCF for Depreciation, depletion and amortization).
So I guess they cannot make any real profit when gas is less than about $3/MCF.
At $2.32/MCF(current market price), they can only cover lease costs + taxes + transportation
At ~$3/MCF they cover lease costs + taxes + transportation +SGA
Lease operating expenses for the third quarter 2015 were approximately $154 million, or $1.40 per Mcfe, compared to approximately $192 million, or $1.67 per Mcfe, for the third quarter 2014. This 20 percent decrease was primarily due to cost savings initiatives, a decrease in steam costs and lower costs as a result of the properties sold during the fourth quarter 2014, partially offset by costs associated with properties acquired during the third quarter 2014. Transportation expenses for the third quarter 2015 were approximately $55 million, or $0.50 per Mcfe, compared to $53 million, or $0.47 per Mcfe, for the third quarter 2014. This increase was primarily due to higher transportation costs associated with properties acquired in 2014. Taxes, other than income taxes, for the third quarter 2015 were approximately $46 million, or $0.42 per Mcfe, compared to $67 million, or $0.58 per Mcfe, for the third quarter 2014. This decrease was primarily attributable to lower commodity prices. General and administrative expenses for the third quarter 2015 were approximately $60 million, or $0.55 per Mcfe, compared to $75 million, or $0.66 per Mcfe, for the third quarter 2014, which includes approximately $13 million and $9 million, respectively, of non-cash unit-based compensation expenses. This 20 percent decrease was primarily due to lower acquisition related expenses and salaries and benefits related expenses. Depreciation, depletion and amortization expenses for the third quarter 2015 were approximately $207 million, or $1.88 per Mcfe, compared to $290 million, or $2.54 per Mcfe, for the third quarter 2014
gpd8252- Thanks for a real answer.
OK - I see this in the current report:
LINN is hedged approximately 100 percent on expected natural gas production through 2017 at average prices ranging from $4.48 to $5.12 per MMBtu. The Company does not currently hedge the portion of natural gas production used to economically offset natural gas consumption related to its heavy oil operations in California.
For expected oil production, the Company is hedged approximately 90 percent for the remainder of 2015 at an average price of approximately $88 per Bbl and approximately 70 percent in 2016 at an average price of approximately $90 per Bbl.
LINN’s hedge book had an estimated net positive mark-to-market value of approximately $1.9 billion as of September 30, 2015.
If this is true, it seems that the bleeding should not be as bad as it always is. I am still confused. If LINE is hedged to receive $88 /bbl/ $5/MMBtu and the market price is $45/bbl/$1.5/MMBTu, they should be doing great financially.
I understand the write downs. What I do not understand is why if their oil was hedged at like $100 per barrel this quarter, how their earnings would be only $.25. They should be more like $2.50. In fact, they should have had almost no impact on earnings (less one time charges) from lower oil and gas prices if all production was hedged.
I always read that LINE has nearly all of its production hedged to sell at high prices. If this is true, then why is the company losing so much money with this downturn in OIL/GAS prices?
This move would indicate another major distribution cut is in store. Otherwise, the extra shares will just siphon off even more cash flow every month in the form of distributions. I would say before they are done, the distribution will get cut 50% two more times (75% reduction from current levels). Otherwise, the offering makes no sense.
Uhh - I think your analysis is flawed. Obviously, this is not a positive thing for the stock. This indicates that another distribution cut is imminent and probably will reduce the current distribution in half or more.
Does anybody know what interest rate this debt being retired is at? It seems to me that they would not retire debt at a low interest rate and then pay 9% in dividends (for long). Unless....they have no intention of sustaining that dividend. The interest is non-discretionary, but the dividend is only paid at their discretion. Additionally, the debt get retired over time, but the equity is ongoing.
Another dividend cut seems imminent, This seems like the only reasonable explanation.
This seems very odd. Supposedly this company is hedged for 3 years and the payback is 3 years at this level. In other words, you get the stock for free in 3 years as the distributions will = the share price over that period. Seems too good to be true, so something must be not as it seems. All the MLP's are about like this. I have to resist buying more, but this does seem too good to be true. I guess I will buy more when this gets under $1, then I will only have to wait a few weeks to get my money back.
The worst case scenarios are calling for the MLPs to cut the distribution by 20%, so you only get 25% instead of 30% payout rates.
A high debt ratio is not so bad if:
1) Interest rates are soooo low.
2) Oil prices do not totally collapse.
Also, keep in mind that LINE is not really "losing money". They are paying huge amounts of profit out to their partners each month (us).
Remember, there has been no reduction in the amount of energy LINE controls. It is all about price. Yes - LINE will have to make some decisions on how to play this collapse in price. Expansion options may be limited (if they decide to maintain the distribution), but they are not going to default or fail. They have too many valuable assets which in time will yield much higher returns than the stock price factors in now. Everyone is panicking that any cut in distribution is a "death blow" to MLP's, but that is totally a myth.
Imagine if LINE paid out 2% and used the rest of their profits toward expansions, acquisitions and buy-backs. This is how all mainstream (non- MLP) businesses operate.
I do not think debt reduction is a good use of capital with rates at these levels. I also so not think that secondary offerings are a good idea with the stock price this low.
The spare cash must come from operations which means 1) cost cutting, 2) distribution cuts.
When oil prices recover (which will happen eventually), LINE stock price will accelerate from these moves. Remember that oil consumption IS NOT GOING DOWN! All that is going down is the FORECAST for consumption. In each consecutive year 2015, 2016, 2017, etc. we will still see all time new record levels of oil consumption in the world.
Of course, investors have no patience. Many are content collecting 0.2% in their bank accounts for decades in fear of stock price fluctuations, I admit, this decline is unnerving, but there is no underlying reason to panic that I can see.
The PONZI scheme posts are out of total ignorance & the fear of distribution cuts is blow way out of proportion. In some way, any investment can be characterized as a "PONZI" scheme.
Do not kid yourself into thinking the government does not have deep claws in the oil production game. Do you really think anybody can just go out and drill and pump oil out of the ground whenever and wherever they please?
If you want to predict where oil prices are headed watch the Russian tension factor. It has nothing to do with anything else.
These moves were critical to maintaining natural gas supplies to Eastern Europe this Winter. The Russians could not afford to shut off the supply, so that move was thwarted for the time being.
Now we must wait and see what happens over the next few years.
Likely the Russian aggression will continue beyond Putin as his successor will be a hand picked clone with the same views of reunification of the Soviet Empire.
Can the US keep oil prices low for decades? Maybe.... Look at what has happened to interest rates. I highly doubt your returns on CD's are going to balloon anytime in the next decade.
Likewise, I do not think you are going to see oil above $60 per barrel for a long, long time.
In 2009, oil bottomed at about $41 almost exactly 3 years ago to this date. At that same time, LINE bottomed at about $11. Oil (and LINE) rebounded rather quickly off of that low and LINE never cut the dividend.
This current plunge has nothing to do with LINE and everything to do with the price of oil.
Will oil go lower? Probably......
If oil goes lower, will LINE follow?....YES
Will oil rebound as sharply as in 2010....Probably not.
Will LINE have to cut it's payout?.....That depends on how low oil goes and for how long.
Personally, I think the drop in oil prices is 100% due to the tension with Russia and is being (secretly) contrived by the US to slow the Russian aggression. Don't you think it is curious why oil production is booming under Obama? Is this what was expected? Don't you remember the "Drill Baby, Drill" political debates? The Russian threat is far more serious than any philosophical political party battles.
I question if there is really as much oil underground in the US as we are led to believe. I think we are tapping our reserves using technology to force the remnants of old wells out of the ground. simultaneously, the US is creating propaganda that we are "swimming in oil" in an attempt to break Russia economically.
I think these low oil prices will continue until we see the Russian aggression wane...and that could take years.
Nobody knows how low oil can go. It is dependent on supply and demand and the tap cannot be shut off, nor can you burn it all up overnight. At some point though, the cost of extracting the oil will catch up and the taps will have to be closed. Saudi oil costs is the cheapest to extract, so that will be the last tap closed.
As with any collapse, prices will overshoot to the down side, so be prepared for a real shock. If the US government wants to completely collapse the Russian economy, oil could go a lot lower for a lot longer. That is what is scaring everybody
Right- Better to say that each QRE share gets 0.9856 shares of BBEP.
I guess the 1/3- 2/3 is reflected in the number of shares of QRE being fewer.
You are right, QRE is trading at a slight discount to BBEP.
Here is my simplistic read at this time:
BBEP = $15.70/Share
Each bbep shareholder gets 1 share of qre for each .9856 shares of bbep:
bbep sharholders get 15.37/.9856 = $15.59
You could read this as BBEP is over-valued, or QRE is cheap.
It seems BBEP produces way more to the bottom line than QRE. I would say QRE is a buy and BBEP is a sell here.
From the 8K, BBEP contributes 2/3 of the revenue.
Here is my reasoning:
1) Oil and gas prices are falling dramatically. This caused the 1st wave of selling. (Rational)
2) The market is in a mini panic right now.
European recession, Chinese weakness (ongoing problem for last 5 years) (Rational)
Ebola (1 person has it) (Irrational)
ISIS Terrorist Threat (ongoing problem for last 15 years) (Irrational)
This magnified the selling. (Irrational) The European recession/Chinese weakness is the only one with an effect on oil prices.
3) The people who invest in these MLP's are more prone to panicking than the average stock investor. They buy for the yield and give it all back and then some when they see the price fall. (Irrational)
4) Short sellers love these MLP's due to #3 and that magnifies everything. They view this opportunity like "taking candy from a baby" when all the old-timers panic and sell. (Rational). These dips are short lived but severe due to the fact that the short sellers cannot sustain the dividend payout for long periods.
The extreme volatility of these MLP's is totally irrational. They hedge against the commodity pricing and have sustained the payout thru much worse times. Even if they dropped the payout by 50% (EXTREMELY UNLIKLEY), they still pay 3x the going rate of return.
Based on old economics, everyone is overpaying for everything nowadays. Sure, back when you could earn 5-10% interest on cash and borrowing costs were 2-3 percentage points above that, these investments did not make sense. However, borrowing costs are near 0% and return on cash is about the same. In today's economy any positive return is an improvement over doing nothing. Fear is still holding the economy back from booming. Interest rates have never been lower, so these times have never been seen before.
Most individuals and companies do not know how to operate in a zero interest rate environment.
The proper approach is to apply maximum leverage and buy everything in sight.
For those who have done this, the last 5 years has been an incredible ride, which will never be seen again by those who are living.