The design and early development of the p38/Tie-2 inhibitor: Array-614 in hematologic cancers - Kevin Koch (link)
Part of an educational session so likely more of a review vs. new data.
MEK162, an allosteric MEK inhibitor promotes apoptosis and in vivo antitumor activity against human biliary cancer cell lines - J. Yang et al (Abstract 934)
A B-RAF-MEK complex reveals a kinase-independent role for BRAF in MAPK pathway suppression - M. Shiva et al (Abstract 2346)
Friday, February 22, 2013
Linn Energy: that did not work so well
From the original 8-K which triggered this series of posts:
Fact #1 – LINN is confident in the validity and accuracy of its audited financial statements.
Drolly I note that for 2012, the company reported net loss of $387 million, or $1.92 per unit. For the quarter the loss was $187 million. (Source here.) Obviously a good part of this loss was write-downs from writing off oil and gas properties that became less valuable as gas prices fell.
However there should be an offsetting write-up in the value of the hedges so that defense will get only so far.
Whatever: unusually for a stock I write about in Linn's case I (mostly) believe in the validity of the accounts. The accounts say quite bluntly that
(a). This is a loss making enterprise.
(b). That this business pays out large and increasing distributions despite those losses and
(c). The business raises ever increasing amounts of funds using ever-more-novel ways of doing it.
To me that looked like a Ponzi scheme on its last legs. Indeed to come to a different conclusion I thought you had to accept some non-standard non-GAAP measures as reality. In other words you have to ignore the audited bottom line for the company.
Many people it seems do ignore the bottom line. They are encouraged by the management - and they might be right - but for the moment I have (and retain) a different opinion.
But I was wrong
Despite not changing my opinion on the fundamentals of Linn I will confess to being wrong on one important (nay critical) point.
When Linn launched Linco (their non-MLP associate which exists only to hold interests in Linn) I thought the money-raising was on its last legs. Specifically I thought that rather than target the non-sophisticated mom-and-pop investors who buy MLPs they were being forced to target more sophisticated investors as they had run the non-sophisticates out of money.
I thought LinnCo meant Linn was on its last legs.
I was wrong. Spectacularly (and unprofitably) wrong.
Yesterday (as many will have noticed) Linn used Linco stock as a currency to buy a C-Corp - a very big acquisition - their biggest to date.
I did not see it coming. It was not even on my original list of risks in the position. Wrong!
This is a great deal for Linn. They get to swap what I believe to be near-worthless stock for some old - but still valuable oil assets. Those assets will generate cash - cash that can keep this whole thing rolling along for a few more years.
So even if I am right that Linn is a Ponzi (and many company supporters disagree with me) it is not a Ponzi that will collapse next week. And so my opportunity to profit will not be next week.
I covered most of my short.
For a loss.
PS. The company now has some time to prove that it is not a Ponzi. Substantial GAAP profits might be a start - but hey - ten more years of distributions would also be effective.
Linn Energy Sticks A Dagger In The Vocal Short Seller Crowd
February 22, 2013 | 19 comments | about: LINE, includes: BRY, LNCO
The hedging activities and actual cash flow results of Linn Energy LLC (LINE) have been under fire over the last few days, starting with an article in Barron's questioning Linn's bookkeeping practices. John Hempton piled on with a couple of scathingly negative articles on his Bronte Capital blog. John makes his money looking for short sale candidates and I like to read his analysis but I think he missed the mark with Linn Energy.
However, Thursday's announcement that Linn Energy will acquire Berry Petroleum Company (BRY) in a $4.3 billion deal should put a halt to any plans the short selling crowd has to undermine the viability of Linn Energy as an ongoing success and profit from a falling unit price. The market likes the announcement, with the LINE share price up about 2% while the rest of the market is strongly down.
Note: MLP/LLC companies such as Linn Energy have units and pay distributions. The words stock, shares and dividends may be used here with the understanding that the rules of MLP units apply including the tax consequences of investing in MLP units.
Background on The Deal
As the press release notes, the purchase of Berry Petroleum is the "First Ever Acquisition of a Public C-Corp by an Upstream LLC or MLP". According to comments made during the earnings report conference call, Linn Energy's development and spin-off of LinnCo LLC (LNCO) as a non-K-1 issuing company facilitated the purchase of Berry Petroleum. The acquisition will be funded by the issue of 1.25 LinnCo shares for each outstanding BRY shares plus the assumption of debt. The use of LinnCo shares makes the stock-for-stock transaction a non-taxable event for BRY shareholders.
The deal is expected to close early in the second half of 2013. Cash flow will be immediately accretive to the tune of 40 cents per year per LINE unit. Linn Energy management has recommended to the board that the LINE distribution be increased by 6% to 77 cents quarterly and the LNCO dividend by 8.5% to the same 77 cents as soon as the acquisition is completed. Distributable cash flow coverage ratio will increase to 1.2 to one even with the higher distribution rates..from seeking alpha
Recommended Reading: New Linn Energy Subsidiary LinnCo Provides Alternative High Yield, Non-MLP Investment Choice..
By Ola Galal - Feb 19, 2013 3:26 AM ET
Egypt plans to repay a quarter of its about $9 billion debt to foreign oil companies in Egyptian pounds, the independent El-Watan newspaper reported, citing Industry and Foreign Trade Minister Hatem Saleh.
The remainder would be paid in installments over the coming period, it quoted him as saying without providing further details. Bloomberg..Comments?..