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Inergy, L.P. Message Board

rrb1981 146 posts  |  Last Activity: 3 minutes 39 seconds ago Member since: Apr 18, 2001
  • Reply to

    Pantz Up - Don' t Loot !!!!

    by stenchcloud Dec 21, 2014 10:03 AM
    rrb1981 rrb1981 Dec 21, 2014 2:35 PM Flag

    Agreed, our rights are being infringed upon. It is one of the reasons why fire arms sales have surged since Obama and his cronies (Holder) have been in power. Holder has been the most heinous of all of them. It really is a shame though, MLK would be so embarrassed by the childish behavior that so called "leaders" have exhibited inciting violence rather than seeking real progress and improvement. Of course, the cycle of poverty and violence will continue until real values are restored.

  • Reply to

    Pantz Up - Don' t Loot !!!!

    by stenchcloud Dec 21, 2014 10:03 AM
    rrb1981 rrb1981 Dec 21, 2014 1:16 PM Flag

    stenchcloud,

    Appreciate your concern, but you do not need to worry about me or my household. As a lifelong sportsman and hunter, I can assure you that my household is....WELL protected.

  • Reply to

    Pantz Up - Don' t Loot !!!!

    by stenchcloud Dec 21, 2014 10:03 AM
    rrb1981 rrb1981 Dec 21, 2014 11:51 AM Flag

    Please take your "gun control" garbage to another website.

    As a reminder...2nd Amendment... yea, perhaps you forgot about that "little" detail. :)

  • Reply to

    A Bond Comparison

    by ronharv Dec 20, 2014 1:52 PM
    rrb1981 rrb1981 Dec 20, 2014 3:15 PM Flag

    ronharv,

    The bonds are indeed quite attractive at current pricing. As you stated, a distribution cut actually provides security to the bond holders as cash is used to either pay down debt or to invest back in the business either in drilling or in purchasing existing production, both of which, in theory should add to cash flow.

    The facts however are quite clear. Linn is overextended. They have highest in sector leverage. They are transforming themselves back into a low risk operator of mature production. The company still possess a treasure trove of high quality MLP assets which are well maintained and operated, but unfortunately, due to poor management (lack of hedging and a shift in strategy) they are suffering. Bankruptcy has been mentioned on this board many time, which is really quite silly. Linn generates an enormous amount of "cash available for distribution", i.e. cash to pay out after maintenance capital (capital to keep reserves, production and cash flow static) have been deducted. The question is simply, will they produce enough to maintain the distribution, not whether or not they are solvent.

    The market isn't always efficient, and thus, it is in times like these, when value investors of the Graham-Dodd school can really excel buying great assets at a discount.

  • Reply to

    Rig Count

    by rrb1981 Dec 19, 2014 1:17 PM
    rrb1981 rrb1981 Dec 20, 2014 3:05 PM Flag

    I'd say that is a rather ignorant comment.

    I seriously doubt you have any clue whatsoever regarding the schedule, quality or origination of the pipe that would be used in the Keystone XL if it were to be fabricated. I doubt the pipe comes from China, but would be tickled if you provided info proving that it does..but I won't hold my breath.

    As for the project failing, it looks highly likely that the project will not happen, at least not in the next few years. Of course, environmentalists shouldn't jump up and down to quickly, the Canadians are still likely to continue producing the oil sands (a very nice natural resource that they were blessed with). It just seems that more of that crude will flow west (potentially on the proposed TransMountain) and eventually make it to China. I'm sure the Chinese will have no qualms buying it.

  • Reply to

    Hedges!

    by jagan1961 Dec 20, 2014 12:51 PM
    rrb1981 rrb1981 Dec 20, 2014 1:11 PM Flag

    "Oil will return to $70-80 by March 2015" - I guess if "hope" can be a strategy for the President, it can work for Linn too...

  • rrb1981 rrb1981 Dec 20, 2014 12:15 PM Flag

    crk00,

    I think you hit the nail on the head regarding the rather evasive and aloof nature of Mark Ellis. In essence, he said they didn't know what the company would look like until they closed the deals (swaps) Which is that kind of like saying "you have to pass the bill to find out what is in it". Very silly and unprofessional. Of course, it is true that it will take time for them to high grade their PUDs to develop the 2015 Capital Budget, but a focused management team should be capable of giving "ballpark" numbers. Linn simply punted.

    But when you think about it, what he was really saying was the company either didn't do their due diligence and analysis on the front end before they made the swaps, or he already knows the answer and didn't want to discuss a distribution cut. I think that Ellis and Rockov are grasping at straws that somehow the unit price will recover and they can buy their way out of this mess.

    Agree fully that the market has lost patience with the "wait and see" approach.

  • Reply to

    Rig Count

    by rrb1981 Dec 19, 2014 1:17 PM
    rrb1981 rrb1981 Dec 20, 2014 12:02 PM Flag

    ghondula,

    Thanks for the kind words. And also, may you have a great holiday season and remember to keep Christ in Christmas, after all, he is the reason for the season!

  • Reply to

    Rig Count

    by rrb1981 Dec 19, 2014 1:17 PM
    rrb1981 rrb1981 Dec 20, 2014 10:21 AM Flag

    bluedreamdreamer2,

    Yes, there are a lot of negative factors but also remember, the total decline rate in the US has increased appreciably over the past 3 or 4 years. Pundits of shale development always like to point out the treadmill scenario where producers have to drill more and more to keep production growing (of course, the same holds true for conventional drilling as well, though to a lesser extent). The reality is that a reduction in drilling in the US will help slow the momentum that has built up over the past few years.

    What will work against US producers is that production is still expected to climb, albeit more moderately now that drilling is decreasing. It really is a testament to the incredible ingenuity of American Exceptionalism that our country has been able to increase crude and gas production so aggressively in an effort to become energy independent. The Saudi's may very well regret the day they forced American producers to get lean. This will manifest itself in continued improvements in drilling and completion techniques that will result in higher EURs, higher IPs and ultimately lower break-even economics. If the US removes the ban on crude exports, the US may very well become a meaningful exporter over the next decade.

  • Latest rig count report is interesting. Shows a decent oil rig count increase in the Barnett (likely the combo play and or Marble Falls), Cana Woodford (which we know has decent economics), Eagleford.

    Losers include the Permian and Williston (Bakken) and Granite Wash.

  • Reply to

    Rig Count

    by rrb1981 Dec 19, 2014 1:17 PM
    rrb1981 rrb1981 Dec 19, 2014 7:58 PM Flag

    Drilling permits do provide another data point, but also remember that they can fluctuate. I think compiling the 2 data points will provide a better picture especially when trended over several months.

    As for shale production and oil sands, yes, economics are greatly hindered at current prices but drilling will not come to a complete halt. Each respective company will seek to high grade their portfolio and focus on their highest returning assets. Additionally, you will see many operators now choosing to spend within cash flow as credit will be difficult to access. With the reduction in rig activity, service companies will be squeezed for pricing discounts as producers seek to lower their D&C costs. The reduction in rigs and reduction in credit will help bend the growth curve of supply in the US...that is, unless OPEC's step children (e.g. Venezuela, Algeria, Libya, Iran) don't cry uncle first.

  • Reply to

    Rig Count

    by rrb1981 Dec 19, 2014 1:17 PM
    rrb1981 rrb1981 Dec 19, 2014 7:28 PM Flag

    bluedreamdreamer2,

    Your rig count number is total (both oil and gas). If you look at the reduction relative to just the oil rig count, it is clearly more substantial and of course, my numbers were simply estimates. The actual reduction could end up being more.

    Yes, this could indeed last into 2016. The Saudi's have additional idle capacity that they can easily activate to "flood" the market as well.

    The silver lining for producers is that for the first time in many years, they will have negotiating leverage with service companies.

  • Reply to

    Oil up 6%

    by crk00 Dec 19, 2014 3:55 PM
    rrb1981 rrb1981 Dec 19, 2014 6:18 PM Flag

    goskiing99,

    Yes, that is the rather aloof Mark Ellis. He really never understood the beauty and simplicity of the MLP format. He came from a growth c-corp background, where growth was everything. The MLP/LLC format is premised on low decline, low risk mature production, high PDP percentage, stable cash flow profiles, strong capital efficiency, a strong balance sheet with appropriate leverage and of course, aggressive hedging to lock in margins. Unfortunately, Linn abandoned that strategy to become a hybrid. The fact that their efforts to morph Linn into a medusa, combining both growth, income and yield into one vehicle failed is one short-coming, but their near complete abandoning of hedging out crude 5 years has brought the company to its knees is nearly unfathomable.

    Wall Street as has been pointed out, could care less what Linn did in the past, they are looking to what Linn will do in the future. While the 1031 swaps/exchanges were executed quite well, it was, I am afraid, not enough to undue the damage.

  • Reply to

    Rig Count

    by rrb1981 Dec 19, 2014 1:17 PM
    rrb1981 rrb1981 Dec 19, 2014 4:15 PM Flag

    Exactly gpd8252, which is why I commented the other day that the E&P sector got extremely fortunate that this drop happened at YE, while companies where formulating their 2015 Capital Budgets. This allows many of them to be proactive regarding rig utilization and commitments. The next 2-3 months will be very telling, with the consensus being that we should expect a generally sharp downward trend. Would not be surprised at all to see 200-300 rigs get idled in 1H15.

  • rrb1981 by rrb1981 Dec 19, 2014 1:17 PM Flag

    Looks like US oil rig count dropped by 10, as compared to 29 last week. Canadian oil rig count dropped by 25.

    Certainly not tremendous declines but clearly a step in the right direction to balancing supply and demand.

  • Reply to

    Any Chance for LINE in the Future?

    by jtsaathoff Dec 18, 2014 2:07 PM
    rrb1981 rrb1981 Dec 18, 2014 10:28 PM Flag

    crk00,

    Correct on not reflecting drilling efficiencies, it is reflected in the many budget reduction announcements that exceed efficiencies.

    D&C budgets are falling and overall, rig utilization is dropping but as you alluded to, drilling and completion efficiency has improved markedly, a testament to American exceptionalism and the ingenuity of hard working Americans. Of course, this will allow producers to continue to generate excellent returns at lower prices, even drilling within cash flow. So, while lower rig counts will indeed result in "bending" the growth curve, it is still highly probably that 2015 US crude oil production will rise over 2014 numbers! Now, one must remember that the overall average decline rate of the US is rising quite dizzyingly meaning a real reduction in drilling can be meaningful over time.

    Linn really goofed in not locking in crude oil hedges more aggressively..even though futures were declining, Linn would have been far better served to lock in margins rather than play games hoping for an increase.

  • Reply to

    For all those that bought in the $16s

    by shorting_amazon Dec 10, 2014 2:56 PM
    rrb1981 rrb1981 Dec 18, 2014 10:14 PM Flag

    Volume was indeed heavy. Ought to have total distributions of around $1.10 over the next 12 months.

  • Reply to

    Any Chance for LINE in the Future?

    by jtsaathoff Dec 18, 2014 2:07 PM
    rrb1981 rrb1981 Dec 18, 2014 8:56 PM Flag

    crk00,

    If you are interested in production cuts, look no further than the Baker Hughes rig count report, released every Friday around 12:00 CST. Last week was the first meaningful decline in oil directed rigs, falling by 29. While the rig count does not reflect productivity increases (i.e. spud to spud time), nor does it reflect the ever increasing lateral lengths and EUR increases, it does give a general sense of what producers are thinking directionally and lower rig utilization means producers are going to focus on their core, high IRR properties.

    I'd expect January and February to show significant cuts. Really, the US E&P sector got quite lucky that this "collapse" in prices happened near year end when capital plans for 2015 were being finalized (typically as late as January or February). This allows producers to better plan rig utilization and reduce commitments. As was seen with the gas collapse a few years ago, many producers kept rigs running simply because they were under contract or because they were trying to lock up acreage.

    I'd look for 20-25% of US oil directed rigs to be idled depending on how low and how long crude stays low. In fact, it could drop much more. I would point out that at this point, lower crude prices from here mean virtually nothing to producers in terms of planning which is meaningful in terms of firming up decision making.

    It is actually quite promising to see the sector responding so rapidly in terms of budget reductions. Typically the industry is slow to react, or has been in the past often resulting in long, drawn out recoveries.

    On the bright side, associated gas production may finally start declining, meaning perhaps a slight uptick in gas pricing.

    While Linn management really goofed up with the Hogshooter and Granite Wash (fiascos brought on by the hubris of Mark Ellis wanting Linn to be a hybrid), it should be highlighted that management did an expert job of "pawning" off their Wolfcamp/GW just in time!

  • rrb1981 by rrb1981 Dec 15, 2014 5:20 PM Flag

    Looks like '08 panic again. No doubt, the collapse in oil is a triggering event. This looks like margin/leveraged fund selling and pure panic. Volumes were up across most issues. The midstream sector fared better, but overall, the purge is continuing and will likely continue until oil bottoms. It's just ugly across the whole sector. Linn, even assuming a complete distribution cut, on an enterprise value/ebitda is getting pretty cheap especially with the hedge book. Linn may be better served simply conserving cash and delevering for a year or two while the market heals. The market is clearly not giving any value for income generation.

  • Reply to

    North Dakota

    by jake_stuckey Dec 13, 2014 7:50 PM
    rrb1981 rrb1981 Dec 13, 2014 9:01 PM Flag

    Baker Hughes rig count report from Friday showed a net drop of 29 oil rigs (and a modest rise of 2 gas rigs). Given we are at year end and annual capital plans are being formulated for most companies, it would not surprise me to see a material reduction in oil rigs over the next 2 months. The Permian Basin saw a reduction of around 20 rigs. How long it will take to correct the supply imbalance remains to be seen...

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