BBEP may give that option or may not. Hard to say for sure. Linn already has a publicly traded corporate structure while BBEP does not. Insiders bailing seems to indicate the CODI risk is there.
Management really should provide some guidance. There might be a time to get out after they announce more details.
Linn is still talking about substantial CODI even though they are in chapter 11. Therefore, they are offering to exchange to corporate shares. I am sure they have tax experts that have opined on this matter. So, pretty safe to say that chapter 11 does not automatically eliminate Codi for MLP unit holders.
Take another big hit off your bong if you really believe any one would buy this for book value when the shares are trading at $0.13 and the bonds are trading at $0.10 on the dollar.
It's meaningless. They have probably had to same price target for a long time and not bothered to update. They are basically lazy #$%$ and take their sweet time to change their ratings and target prices.
GAAP does not require mark to market for all assets. So, in case of oil and gas assets, they are almost certainly worth less than book value. Compare the book value to PV10 value.
You better pray for no CODI if you do that. Linn is expecting substantial codi after its chap 11 restructuring (for non corporates shares). Read their press release.
BBEP got a debtor in possession loan under bankruptcy. A totally different animal. Apples and oranges comparison.
If bonds get 20 cents, then equity should get zero. Bonds are senior in order of priority. Even the preferred is senior to the common.
Market value of assets less than liabilities, so risk you will end up with zero. Bonds are trading at 9 cents on the dollar for a reason.
I think I have a different point. Oil and and gas assets on the balance sheet can be above market value, as long as the UN-discounted cashflows (not present value) are greater than balance sheet value.
BBEP impairment rules. Book value of oil assets can be greater than market value as long as undiscounted cashflows are greater than book value. From 10K:
"Oil and gas properties are reviewed for impairment periodically and when facts and circumstances indicate that their carrying value may not be recoverable. We assess impairment of capitalized costs of oil and gas properties by comparing net capitalized costs to estimated undiscounted future net cash flows using expected prices. If net capitalized costs exceed estimated undiscounted future net cash flows, the measurement of impairment is based on estimated fair value, which would consider estimated future discounted cash flows. For purposes of performing an impairment test, the undiscounted cash flows are forecast using five-year NYMEX forward strip prices at the end of the period and escalated thereafter at 2% . Production and development cost estimates (e.g. operating expenses and development capital) are conformed to reflect the..
There are at least 2 acceptable methods for oil and gas assets. BBEP uses "successful efforts" method. Not sure if both have same rules for impairment.
For impairment, successful efforts method first compares carrying asset value to undiscounted cash flows (not market value). If the undiscounted cashflows are greater, then no need to write down the asset. So, the book value can be greater than market value. Hedges are marked to market, but the oil and gas assets only in some situations.
It's in the 10K. Look it up.
Different companies use different accounting methods, which can result in different asset values on the balance sheet.
BBEP only has to write down assets (impairment charge) when value on books is below undiscounted cash. flows. Since discounting a long lived asset (which any market based valuation would do) can lower its value significantly, the value on the books can be materially higher than market value.
This test is done on an asset by asset basis, so it is fair to say that a chunk of their assets are at higher value on the balance sheet than the true market value.
Evidence of this is the PV10 calculation being well below the book value on the balance sheet
Not sure a non cash asset write down can offset CODI. If so, you are about the only one that thinks so. Wouldn't Linn have been able to use same trick?
For the bean counters to figure out, but I do t think that easy to avoid.
How do you figure? About 213mil shares outstanding. Cancelling $1bil would generate almost $5 a share. Unless I am missing something.
Book value is based on historical cost (i.e. when oil was $100). They did do some write downs, but that is not necessarily to market value. They do publish the PV10 for oil&gas reserves, which was much less than book value. That was the tipoff most ignored when looking at the balance sheet.
There have been plenty here saying they would be in trouble once hedges run out, unless oil went way back up. Math not that complicated going from $85 hedge to ~$50 in current futures market.
Senior notes have been only reasonable play for quite a while.
Why don't you just print their home addresses and pass out guns... or is that what you are praying for?