Even if they write down the value of their o&g properties by 50% the company would still be worth more that it is selling for now. On this basis I think you could say that it is undervalued. They can probably sustain the dividend for at least two more quarters before they will have to cut it again. Based on the most recent numbers it is covered more than 3 times. I think the stock is worth more than $2.50 a share and I just bought some today.
I agree with you but will we live that long?
The game plan for all of these mlp's that are dependent on oil prices is now just survival. What they will have to do is basically shut down new drilling activity, pump as much as they can at prices that still yield some cash flow and cut expenses to the bone. If and when the price of oil recovers say to the 60 to 70 dollar level they can then afford to start drilling again. I doubt the banks that they owe money to will want to be in the oil business so as long as they can pay their loan interest they will probably be willing to carry them. It is going to take a while and a few players will be forced to merge but some of these stocks will look very cheap when the market calms down.
Today they destroyed a lot of market value by stupidly cutting the dividend and then saying they want to raise more capital. They should be buying back as much stock as they can at these levels. If they want to take it private again at a decent price let them do it. They sure botched their credibility today.
Just about any reverse split is the kiss of death and we saw a good example of that today. The numbers they reported were not too bad on an operating basis but they wrote down the value of their properties so much that they have wiped out the stockholders equity. I guess they can continue in business as long as the creditors let them but they need a big turnaround in oil prices to get any sort of recovery.
If you read the press release from Line you will see that there was no reason for them to cut their dividend now. They have a huge profit on their hedges and I think they want to use the money to buy back debt and maybe some stock. The fundamentals do not warrant a $4 price. If there is any recovery in oil prices during the next 3 years MEMP andLiNE at these prices will look like a real steal.
If you look at the market action of the stock earlier this week it is pretty clear that someone knew bad news was coming. It is hard to believe that with airline traffic so strong that they would have to write down their aircraft at this point. Not people I want to be involved with. Sold my stock this morning.
After hours trading tends to be extremely thin under normal conditions. considering what is happening to mlp stocks it is too crazy to participate.
I cannot see where a reverse split will do them any good. Most of the reverse splits are desperation moves. Lot of times the stock will revert to its original price. Big mistake.