The problem isn't the price of oil. The problem is their debt. This management team has learned nothing.
LINE can't buy back all that debt and continue drilling enough new high-decline wells to continue generating revenues needed for cash flow.
Oil could go to 100 tomorrow and there would still be a dozen or more E&Ps with strong balance sheets and paying divvies, while LINE stays under $5.
You could have bought XOM on a true over reaction drop, a company still buying back shares, still sporting a divvy, still holding refining assets, still with a fortress balance sheet. Or if you want just a Permian, Bakken player with a divvy and little debt you could have bought OXY. And you bought LINE?
At their current buy back rate they can retire their debt in 8 years. Is that really what you want an oil comany doing with its cash flow??
Sentiment: Strong Sell
Wrong. There were quite a few people predicting that the Fed's ZIRP was fueling what essentially was gambling on the part of these companies. Debt ratios were way out of balance and anyone - ANYONE - who thought oil prices would stay high was and is delusional. Management was addicted to debt and ignored historic pricing and frankly the industry supply trends being established 3 to 4 yeas ago.
Correct. Ellis wanted yo make money the old fashioned way through balance sheet manipulatiion and derivatives contracts. Linn was about finding undervalued wells and making the most of them.