During the last week the price of LINE is down and over the last 2 days is up only about 10 cents.
EVEP is very interesting which says something about investor demand for EVEP. EVEP is up
$2.50 over the last two days and up $3.00 over the low of the last week.
In the end unit price is about investor sentiment and demand.
I own a ton of Linn Energy and very little EVEP but might have to reconsider EVEP
with only $1 billion in debt. Think about it, when was the last time a MLP in the
upstream of the sector moved $2.5 in two days. Very very interesting.
If we hit a rough patch in the market and values retreat, EVEP might be the better option
for distribution and price appreciation on the rebound.
Morgan and other investment banks do not help CHK as can be seen by the terrible
hedging done by the new crew. CHK management needs to understand that these
investment banks get rich by separating a client from his money. That happened
with CHK and that appears to be the reason CHK shares have been performing
poorly in the second half of 2014.
If the price keeps going lower, Chevron, Exxon or PB is going to join together with
Berkshire Hathaway in a joint venture to buy CHK and take it private before current
shareholders reap the benefit of the make-over of the balance sheet.
Still management needs to get smarter and understand that the investment bankers get rich off of their clients, not the other way around.
The debt is not the only problem. The reason the share price is reaching the lows for the year is the under-performing asset base.
The problem with CHK is their hedging is killing them.
The prices they realized for natural gas, liquids and oil is below EOG on all
three and that applies to most of the producers in the shale areas. CHK is
getting killed and saw price realization and earnings crater this quarter because
they are getting less than $3mcf for natural gas and almost $10 less for oil and
natural gas liquids than other domestic producers.
They did post your reply.
When I looked over LNCGY I saw a company with a declining cash position, increasing debt and falling stock price over the last 18 months. The investment banker for the company had dozens of companies look at one of the possible deals with LINC and the interest was not great.
If you look at the big successful deals around the world in Australia, Africa, Russia, Canada, etc., the multi-billlion dollar multinational energy companies and mining companies want in on the best projects and those are the European, Canadian, Chinese and American companies and they put up good money if the prospect and potential looks enticing. The fact that 99% of the companies did not want to come up with serious money should tell you a great deal about LINC and its portfolio of projects.
On paper the value of many mining projects looks greater than the stock value but most mines that are not developed never get developed.
As to the oil and gas in Australia that LINC holds leases on, the six wells that will be drilled is like looking for a needle in a haystack in terms of the size of the leasehold.
The U.S. drillers: EOG, Chesapeake, SWN, DVN drill 500-1000 wells a year and to develop a prospect they drill dozens of wells each quarter, so the six well that LINC wants to drill in 2014 does not look serious to me. I realize wells usually cost $10 million each and LINCs cash position is a problem, so I see why they are not drilling a significant number or wells. It's too bad they could not interest another energy company to drill 30-40-50 wells. The cash position of LINC could take shares lower if it keeps falling each quarter.
Share price decline over the last 12 months says it all, investors are not convinced and those 60 companies that looked around were likewise not convinced.
The hand full of wells that Linc is going to drill is a double edged sword. It is like wild cat drillers in the U.S. 50-100 years ago. Finding the sweet spots in a large field takes half a dozen wells in every area of the field at different depths. This is going to be like fishing in the sea.
If Linc had a partner now that was going to drill 30-60 wells all over the place that would give them a better picture. In the U.S. Devon, Chesapeake, SWN, EOG drill 500-600 wells every 12 months.
The six Linc wells are really a pittance, a #$%$ shoot or long shot in terms of gaining a picture of this large leasehold.
Wells typically cost $5-10 million each and usually you are at the higher end of the price range on land that you have not perfected your expertise and resource delineation.
Until that coal royalty is in the bank it might just be pie in the sky, especially when 60 companies did not come up with an offer that was acceptable, that tells you that 60 companies did not really want to get involved.
When the Los Angeles Clippers basketball team was made available last month they received three offers: $1.2 billion, $1.6 billion and $2 billion by Steve Balmer, the former Microsoft CEO.
This royalty does not look like the same type of legitimate money offer.
Lots of cheering on this stock but ask yourselves why the shares have declined by 50% during the last year. If the company was doing great as the cheering would indicate you would not have had the stock at under $10.
The projects the company is touting require years of infrastructure and capex expenditures in the billions.
How long do you think that takes to put your financing in place and build out. Most projects I have watched in Australia take five-ten or more years to develop and construct before the revenue comes in. Same for coal to gasification. That is why you can count the projects on one hand and they involve huge companies that are multi-billion companies that can borrow $10 billion or $20 billion to develop a large project.
This company appears to be pie in the sky and I am sure we will not see any significant revenues on a yearly basis for years. In fact with the market cap of the stock and cash reserves I wonder how low these shares fall during a significant market correction?
SHOW ME THE MONEY!!! I DO NOT SEE IT IN THE FINANCIAL STATEMENTS and neither do investors around the world. Anyone make any money on this stock in 2013 or 2014??? That answer should tell you everything. These hyped projects are far from existing infrastructure which takes years to build.
Company is overpriced in my opinion and I believe share prices will go much lower during the next quarter.
Ensco is adding what 6-7-8-9 new rigs over the next 6-12-18 months. Not only Ensco but the other big three are also doing the same number of new rigs for off shore drilling.
With all drillers showing weaker utilization and weaker pricing other than SDRL, there is going to be a glut in 2015. You should expect all drillers to drop in price. Is that 10%. Most people think the entire market is going to experience a drop which occurs every 5-6 years. The drillers could drop more than the entire market especially if those 20 new rigs being delivered to all the drillers next year only have 50% utilization and at lower rates.
The sad thing about the tainted meat that was sold to McD. KFC, etc.,
was not that it was sold to them, but that they do not test the product weekly and this was exposed by an investigative tv reporter with a camera planted inside the plant.
Why are McDonald's, KFC and Pizza Hut buying meat from vendors, especially and China and the executives at these companies do not test the product they buy to see that they are getting what they pay for???
The sad thing about McDonald's buying expired meat
and selling it is that the management in China
trusted the Chinese to not sell them tainted food.
Why would anyone who knows the Chinese
trust them to give them the required specified
product? I think McDonald's management was
When dealing with the Chinese you have to test
what you buy or you get inferior product-components
Tainted food, tainted water, tainted air are a given in
China. It is a major polluted
environment and that includes food and water and
it is only getting worse.
This is one reason that wealthy Chinese have been
flooding into home purchases in Australia, Canada
and the U.S. over the last decade. The city of Irvine
in Southern California according to the L.A. Times
this week is now 43% Asian.
You have to wonder about McDonald's management
not testing their food suppliers product every week.
Try the Yahoo Finance graph for the last 5 years on OAS and CHK and compare the two. One company is up 60% over the last 5 years and the other is up 250% over the same period.
Let's deal with the real impact of that message and my comment.
I did make a slight miscalculation as you pointed out. SSE is taking off $1 billion of debt once they release the next financial statement in another month. Quite an impact on the performance of the shares don't you think.
The point I was trying to make and cheerleaders missed is that OAS and CHK had similar amounts of acreage in the Williston basin. CHK dumped their holding in the Williston( what did that achieve in comparison to OAS having a value of $6 billion based on the Williston. That is the real point.
The second major point is that OAS has $2 billion of debt and stock market capitalization of $6 billion. CHK has a stock market capitalization of $18 billion and $11 billion in debt. It's an issue of value and valuation as determined by investors.
OAS investors achieved a 250% return over the last 5 years on the Williston and CHK saw their company sell a similar amount of acreage in the Williston.
Oasis (OAS) is worth one third the value of CHK and basically operates
on 500k acres in the Williston Basin about the same acreage that CHK
sold in the Williston area back in 2013.
I realize that OAS only has $2 billion in debt while CHK has $12 billion in
debt but CHK produces as much production in one of its major areas as
OAS produces for its entire company.
That debt is an albatross around CHK's neck and the company keeps
reporting sales of assets (another this week), but they are small potatoes
in comparison to the $12 billion debt.
It drives me crazy to see OAS at a market cap of $6 billion and it keeps
going up and up while CHK is going sideways.
Unloading $150 million in assets or $300 million has cumulatively not
reduced that total long term debt number, not in 2013 nor 2014.
I realize the balance sheet is being "de-leveraged" or whatever but the
shares are stuck.
I would not be surprised if OAS continues to outperform CHK in 2014.
Was it a mistake to sell the Williston acreage in 2013 for peanuts when
the companies in that formation have been going crazy in 2013 and 2014?
OAS seems to indicated that it was.
Nonsense. Show us your brain power before spouting off or do your research first.
PM - from $33-91 a share and dividend from 40 to 94 cents since 2000.
Lorillard- from $19 to $65 a share over last 5 years, dividend from 30cents up to 60 cents.
Reynolds-$4 a share to $60 a share since 2000 for a 1,000% return, dividend up from 20 cents to 67 cents for a 300% increase.
tobacco at risk? Give me a break. The dividends paid by the tobacco industry to its shareholders have been the greatest over the last ten years in tobacco's history. Same goes for the value of the companies.
These tobacco multinationals own interests in cigarette companies all around the world. Have you ever heard of China? Five times the size of the U.S. with the greatest per capita consumption of cigarettes on earth.
You really think the oil and gas industry is at risk? Carl Icahn is the largest individual shareholder in this company. How do you think he got to be so rich? Investing in companies that offered the best returns that is how. You do not become one of the wealthiest 50 Americans by being stupid and he did it by investing smart. That is why he owns more of CHK than all the posters on this message board.
There is a reason that CMLP is paying 9.25% on the preferred issue, the balance sheet debt.
Linn Energy which I own a pile of is only paying 6.5% on its debt and expects that to drop with
the Moody's upgrade on Linn Debt.
CMLP has too much debt and this preferred issue is really the same thing with a very high cost.
I would stay away from this until there is a market correction and they get the debt under control
and demonstrate the ability to pay less to finance expansion. There is a reason that CMLP has
to pay these high interest rate/dividend rates on debt/preferred.
If you look closely, it appears Devon told its shareholders and analysts that they expected to receive between $1.2-1.4 billion. How is it that Linn Energy was pushed into paying so much more? That is what Linn investors should be asking.
Shaman, you said you talked to your broker at Wells Fargo and told you his analyst had not commented on the transaction. I suggest you read the following from Barrons today and the author's quotation from Wells Fargo's David Tameron.
Before you tell me to go sell fish, whose the one here that smells. One of us is very accurate, you, your broker or me? I think Levisohn and Tameron at Barron and Well's Fargo would say its not me.
Suggest you read the article at Yahoo Finance, Linn Energy from Barrons
"Linn Energy Buys Devon Assets: Assessing the Deal"
By Ben Levisohn
Devon Energy (DVN) agreed to sell non-essential U.S. assets to Linn Energy (LINE) for $2.3 billion today, helping it further its transition from natural gas to oil.
Wells Fargo’s David Tameron thinks Devon’s got a good price from Linn Energy:
…headline number ahead of expectations; the transaction went off at ~5.1x 2013 EBITDA for majority gas assets (275 MMcf/d, ~1.2 Tcfe of reserves). Not surprised the deal beat our $1.1B estimate which we viewed as conservative, but based on recent conversations with investors, proceeds also above high-end of expectation range (we think Street was modeling $1.2$ 1.4B). The divestment helps further delever Devon Energy’s balance sheet; management expects to reduce net debt by ~$4B by year-end. Overall, we view the transaction very favorably as it should be wrapped up sooner (we modeled Q4) and at a higher price than expected. As a reminder, we recently upgraded shares to Outperform and we continue to recommend the name.
Tameron updates his note:
We received a few questions following our thoughts on DVN’s transaction. Primary question was on the EBITDA multiple; to clear up any confusion, the 5.1x we referenced below was based on aftertax proceeds. Using the $2.3B pretax figure, which is more appropriate, results in a 6.6x multiple (based on 2013 EBITDA provided by DVN).
I am not griping. Merely pointing out that Linn Energy was paying top dollar in the sector for Berry and Devon according to analysts that follow the sector.
Most energy companies including Devon and CHK have been attempting to improve the debt equation of their balance sheets.
Linn has not joined the crowd. Without excess cash that debt number grows which CHK eventually found out when its share price cratered in half.
It is a lesson all energy operations should pay attention to.