Just another guy out of hundreds making a forecast. These experts, pundits, and analysts alter predictions with the speed of eye blinks.
A week or two ago I read in the WSJ that SA sells less than 6% of their production to the U.S. They sell heavily to China, Indonesia, and other Asian countries. A poster found the entire article online and posted it here. Their major buyers and competitors do not include the U.S., which receives most of its imported oil from Canada. Lots of misinformation around re who's doing what and for what reasons. On the internet someone's idle speculation becomes someone else's fact, which is then posted and reposted as absolute certainty. I guess the moral is to be sure you know the source and that it's authoritative rather than a hyped-up fever dream.
A significant cut (and the sooner the better I think) is clearly built into the current price. But because it's needed for the financial health of the company , LINE/LNCO may well rise upon the announcement (although there could be a quick downdraft from those who think a 26% distribution is reasonable). Meanwhile, for those looking for a safer Linn investment with around 12% interest to maturity, the 2020 Linn bonds are nicely holding up. At the moment I've got 70 of them at an avg. cost of 86.5 (which, for those new to bonds, really means $865 per each $1,000 bond. (Technically they're called notes because they mature in less than 10 years.) I'm happy to answer bond questions if I can.
Many posters seem to extrapolate a trend based on extremely short-term price movements, whether they be with oil, LINE/LNCO, NG, etc. But trends aren't ephemeral fluctuations or short-term volatility. They're directional price movements over many weeks and months. And they're hard to fight without coming out bloodied. Folks also tend to project trends from statistically invalid "patterns." Simply because something occurred , say, the past three summers doesn't mean that it's a good bet to happen this summer, especially when dealing with stock-market vagaries and global macro-economic events.
So how does one forecast? Well, if the context is pretty much the same (and it hardly ever is) and it's been 80% consistent in its effects for a couple of decades, then it may not be a bad bet to occur again. Still, we never really know, so any stock-market-related price forecast asserted with confidence is just blowing smoke. And even assertions in capital letters won't change that.
Neither. There's just too much short-term uncertainty. The Feb. guidance, if it seems sound, will provide some possible direction. But keep in mind that Linn has "guided" before and been wrong. Meanwhile I don't see the possibility of good news coming out between now and then. So I'm in wait-and-see mode with an eye on 2017 options should the premium ever become attractive.
My goodness, you (our board's Name-caller in Chief) are certainly a shining example of shameless hypocrisy. It wasn't long ago that you called me "a worthless investor" and then some for selling all my shares in the 23s and not holding despite the subsequent collapse. And now I see that you've written , ". . . actually thinking of dumping LINN soon." You seem to have a set of ugly values, Bunky, a sign of a weak man's imitation of strength. Ugh! You should have capitalized the word "bull" in your moniker. You're now on Ignore, little fellow, which will mean nothing to you but lots to me.
Taking the daily temperature of oil prices reveals trading volatility rather than a meaningful trend. If you care about a trend, I think a monthly price provides far more telling insight re the oil market.
I won't say why I think so again, but re the hedges, if oil is $60 over the next year or two, then that 35% that's unhedged plunges a very shaky DCF way lower. Meanwhile, there's the uncertainty about how much of a dist. cut is inevitably necessary and whether management will have the courage to make the cut substantial enough.
What goes, Sidney, is basically Linn's precarious financial condition as long as the company hemhorrhages cash flow by grossly overpaying a distribution that should be more like a dollar or less, at least until the debt to equity ratio drops to no more than 1.25 and the DCF is a sustainable 1.1 to 1.2. (And longs would still receive a wildly high income based on the company's current PPS and today's interest-rate environment.) With decent financials the distribution can be raised. Otherwise LINE slips into the single digits.
I remember when Pickens was endlessly touting NG as the investment to be in because it was going to soar to undreamed-of heights even as NG prices were dropping and dropping and dropping. I figured him to be just another media-created blowhard. It amazes me that some folks bestow credibility on the man today. I think of him as the Donald Trump of energy touting.
Press releases aren't manipulation, Bunky. People are allowed to say what they want in the U.S. absent clear proof of malicious intent and outright lies. And who's investigating? Mr. Magoo?
B.Bunny, if Linn cuts the dist. to $2.00, as you guessed might occur, I'm not sure that the units' PPS would necessarily decline. The dist. percentage would still be nose-bleed high and could well encourage buying from those who regard the current PPS as discounting a larger cut than $.90. However, too small a cut may cast doubt on Linn's willingness to get their financial house in order. Anyway, the sword hanging over Linn's PPS goes beyond dist. ambiguities and reaches into the Feb. earnings announcement of a Q4 cash-flow decline, per Linn's guidance. Now THAT will initiate some selling, even if 2015 guidance (which'll be a big guess at best) is quite positive.
The Linn 2020s now pay more than 12% to maturity and are B rated (5 levels below the lowest BBB- in the investment-grade category). As a contrasting example, the Conoco Phillips 2020s yield 2.35% to maturity and are A rated (that's 9 rating levels above Linn). Big risk = big bucks. It all has to do with financial strength and stability. So bond holders (like me) and loner-term unit holders should mutually be rooting for a big cut in the distribution and, thus, a significant increase in protective cash flow. However, I suspect that wishful thinking will prevail. So my preference is for the bonds at current levels than for the riskier LINE/LNCO bet.
RRB, certainly Christ is the reason for the specific holy day, but the season (as I regard it) is a long paean to commercialism. Not that it's a bad thing in a capitalist economy.
Good post, Blue, along with RRB's. Both of you have a refreshing connection with realities as opposed to typical message-board fever-dream fantasies.
"Oil will return to $70-80 by March 2015" Great news, Jagan! I suggest that you notify the International Energy Agency so they may alter their forecast.