"That said management is looking to get the unit price up and so the cost of equity down. Then use LNCO to buy up a low leverage c-corp. Which avoids the insanity of using extremely high cost issued or retained cash flow to directly reduce leverage."
I like how you eventually get back to recognizing that Linn's balance sheet and leverage is higher than is desirable despite denying it repeatedly. You have an excellent career in politics awaiting you.
Linn is trying to run with a debt/ebitda ratio (oh, you know, that metric that sandforbrains denied even existing before he got his %&# handed to him) that is more suited for a midstream. The rest of the E&P MLP sector is running with 3.0x and Linn is running with well over 4.0x...ha ha...but clearly you recognize that using LNCO to acquire an underlevered c-corp is needed to get the balance sheet back in order..which is precisely what I said was the second step in the turn around of Linn. Achieving coverage above 1.0x and addressing the untenable high decline was #1, now addressing leverage is #2. Deny it all you like, but you aren't fooling anyone. Never have. Never will.
I never said the California operations were declining. I said they were steam assisted, which is indeed a recognized tertiary recovery method.
More fabrications. You have proven that there is no level that you will not sink to. You are as much of a low life as the degenerate sandforbrains.
You have taken exception to Linn's bloated balance sheet every time it has been pointed out. It is obvious that you cannot handle the truth and are still very ticked that Linn bond isn't at $40. You can be snarky all you wish, but you and I and others here all understand the implications of the '16 natural gas swap shortfall and the hole it will make. Strong coverage ratio is a very easy know for them to turn. If you are relying on the market price to recover so you can issue higher priced equity, then you have proven that the model isn't sustainable without market cooperation. And there is a big difference in having cheap equity to grow versus needing cheap equity to maintain. Linn's maintenance capital ought to be sufficient to keep cash flow/production/reserves flat without the need for outside equity.
Oh, I notice Linn bond still isn't at $40 despite your desperate pleas and spin.
Ha...you're still upset about the fact that Linn could not manage the high decline rates with their unpredictable drilling program.
It doesn't matter though, Linn saw the light, abandoned the hybrid model is back to the original business model.
Sorry, as far as my politics are concerned, I am not a progressive or a liberal. Didn't vote for the clown in office and don't support his anti-American policies.
With that being said, your life must be completely miserable. You complain non-stop about our national situation, which I fully agree is messed up, but I do not let it ruin my life.
Meanwhile, enjoying my monthly distributions from Linn bond.
Oh, have you seen the social degenerate sandforbrains lately?
It is a great report. It clears most concerns thru '16 and clearly more progress will be made this year, in '15 and '16.
Now they simply need to execute. The pressure of having to deliver on the drilling side is largely removed with the addition of Hugoton, they have plenty of drilling opportunities (low risk, low cost) as well as the plentiful high IRR oily PUDs held within the Berry portfolio.
A very solid report.
Street should be very pleased. Surplus coverage of $103 million for '14. That is over 1.10x (331 million units outstanding @ $2.90/unit). This coverage will cover the '16 natural gas shortfall (presently a $1.00/mcf reduction on the swaps on 300,000 mcf/d, or a little over $100 million annually).
Nice to see an update on maintenance capital reduction of $300-$400 million.
Also nice to see pro forma decline rate of 15%. A very nice reduction from the untenable 35% from several years ago. Company is finally returning to tried and true formula. Now back to the rinse and repeat strategy of buying mature, high PDP, stable, low decline properties, hedging them out 4-5 years and being an operating company rather than a hybrid driller.
I added some LNCO today.
Revisionist history. I think you will find the board was quite pleased to be rid of the degenerate sandforbrains.
I have seen no one aside from yourself desire his return. Of course, he would need to grow a backbone first...not likely for him.
Linn bond still not at $40.....of course, you really don't need a reminder do you.
Agreed. 2014 is a year of transition. Until the second half of the Devon deal is completed (i.e. the divestiture of either GW or Wolfcamp, or perhaps Cleveland Sands or other yet to be mentioned assets), we won't have a really good picture of the mix, decline rate etc.
Of importance that investors should be looking for tomorrow will be updated guidance on maintenance and growth capital budgets. I expect both will be down, materially so at that. Nothing like a reduction in capital intensity by divesting the high decline assets that forced them to be so active and aggressive in drilling to stem those declines. Coupled with their ability to now slowly and more methodically high grade their portfolio and focus on the higher IRR oily PUDs in the Berry portfolio, we should expect to see capital efficiency increase meaningfully. This should be far more evident once these deals are finalized. 6% Hugoton declines will help the overall average significantly.
More fabrications. You really need to take you medicine.
Anyone is more than welcome to go through my past postings regarding EROC and see the truth, rather than listen to your distortions.
And Linn bond still isn't at $40...
As for sandforbrains, he was a zero. Pond #$%$. A nervous nelly that couldn't own up to his mistakes. He had to leave, inability of his persona to accept his imperfection. He is not missed.
As for you, are you still using your dadnorris1 identity as well as your main one? How funny it is that you must resort to multiple IDs. A function of your schizophrenia?
Wrong, as usual.
I was never high on EROC. I was, and am, very interested in the recovery. After all, it was I that pointed out the self dealing of Joe Mills, specifically I mentioned the divestiture of the crown jewel mineral rights during the first time he nose dived the company. Then he divested the world class collection of Panhandle midstream assets that had been assembled piecemeal from a variety of companies and were sought after by several different MLPs.
The market has a way of presenting opportunities and I prefer to stay familiar with as many of them as possible.
BTW, Linn bond still not at $40 sonny...
I agree that tomorrow's announcement could be disappointing. However, I am looking for signs of improvement that might not be yet evident in the quarterly metrics. It is a shame that the corporate US is so hyper focused on quarterly metrics rather than on longer horizons. The DCF coverage will simply be a snapshot and not overly reflective of the pro forma mix of the company.
Things that will be important to listen for during the call
1) Pro Forma Decline
2) Updated Maintenance & growth capital spending for remainder of '14
3) Projected DCF inclusive of acquisitions/divestitures
4) Updates on hedging
Agreed, NGL realizations may be weak in Q2. We will find out on Thursday to what extent.
As I've said repeatedly, 2014 is a year of transformation for Linn, so I would not get worked up over negative results. Certainly positive coverage ratio is a desired, but there are far too many moving pieces right now, especially since the divestiture of the remaining Wolfcamp and/or Granite Wash have yet to be announced. We need to see the size of those tentative deals relative to the size of the Devon and Pioneer deals to get a feel for what Linn gained and lost via the 1031 swaps.
Then, once the deals are completed I think the true condition of the company will be more clear.
What will be important is to get a feel for the pro forma corporate decline rate. I believe it will be in the mid teens range, which is a marked improvement over the mid 30% decline rate that they had just a year ago! Management has once again gotten the religion and understands fully the hybrid model did not work. We are returning to the tried and true practice of being primarily and operating company and not an aggressive growth through the drill-bit company.
Certainly VNR "miss" on coverage is an interesting data point, but I'm not convinced that we can draw much from VNR's operations vs Linn's operations.
Now, if you can pinpoint macro issues at VNR (like Permian basis differential blow outs) that would also impact Linn it might give us some info, it's probably not an apples to apples comparison given the geographic basin diversity at Linn.
I think anyone trying to predict quarterly performance numbers at Linn during '14 is going to have quite a bit of work set out in front of them with the pending and completed Wolfcamp/ExxonMobil swap, Devon deal, Pioneer deal, Stack play divestiture etc. A lot of moving pieces with backward dated effective dates on some and lack of clarity on hedges on some of these recent deals. I think the waters will be much more clear in '15.
What we do know is that directionally, management is making the right decisions to get the company out of the ditch and managing decline by divesting newer production and acquiring more mature, stable production.
Still blaming Obama and the "short attack" I see. Doesn't that seem a bit old? Did you ever stop and think managements lousy performance might have been a contributor?
They botched the Hogshooter and Granite Wash, allowed the balance sheet to get totally out of whack and I might add it is still bloated, strayed from their model of hedging out 5 years and tried to morph into a growth through the drill bit company. Of course, now they are coming back to the tried and true business model of acquiring properties that are largely developed.
Afterall, Linn is and always has been more of an operator than a developer. The hybrid model was a disaster. They neglected to run with a sufficiently high enough coverage ratio to accommodate mixed results. Management found out that they didn't walk on water. They failed to understand the impact of letting the overall corporate average decline rate reach 30-40%. It was a stunning lapse of due dilligence that cost investors dearly. The street punished them rightfully so and continues to demand they show results before rewarding them with a multiple that is more deserving of a midstream MLP.
Without the Berry deal, Linn's DCF coverage would have been a complete disaster. It is surprising more individual investors did not praise the deal, even at the inflated ratio. They have no idea how ugly it would have been with Berry (just back out the pro forma numbers0..even the internal bank strategy, the lifeboat that is saving Linn, would have not been nearly as successful without Berry's high end Permian acreage. Sure, Linn would have still had plenty of acreage to divest in the GW/Hogshooter/Cleveland Sands, but those that mock the Berry deal reveal themselves as investors that didn't do their homework. Berry saved Linn and will continue to provide Linn with quality, low risk oily high margin PUD opportunities. It was the reason I started building a position in LNCO during the crazy Kaiser debacle.
More babbling. We all know the markets are "mostly" efficient, but it is those incredible opportunities that come along when they are not efficient that allow us patient investors to make market beating returns.
As for value for value swap, it is not up to the market but up to respective management teams to decide the fate of whether those asset acquired and divested perform as expected.
Make sure to remind sandforbrains that Linn still hasn't raised its distribution post Berry and continues to underperform the market significantly over the past 2+ years.
Yawn. You know fully well Linn lives on the delta of what the market of retail income seeking investors will pay for a cash stream generated by E&P assets and the what the private market sellers will pay. When Linn issues equity and debt, they are capturing that spread. It's very simple, but I'd expect continued childish antics from someone so full of hate as yourself. How pathetic your life must be to have it consumed with hate.
BTW, I haven't seen your degenerate friend lately? Still sulking over not being about to post finviz charts anymore?
Linn bond still not at $40
I never said riskless clown.
I simply commented that Linn is getting back to arbitraging the delta between the public and private market value for production....back to their roots and abandoning the hybrid model that flopped due to their inability to achieve consistent returns in the Hogshooter.
As for the funding, yes, we can read the release. And Linn bond still isn't at $40...how many more billions in deals will it take for them to get it back to $40?
It is the cumulative effect of multiple acquisitions that will ultimately manifest in meaningful accretion. The decline rate of 6% is superb, among the lowest in Linn's portfolio and sends yet another affirmation to the street that management gets the message loud and clear that managing decline is paramount.
This should dove-tail in nicely with the BP/XOM packages and likely should be light on SG&A given the field infrastructure and operating presence already in the Hugoton.
Looks like $90 million of the purchase price is being funded via the divestiture of undeveloped acreage, so, again, another nice example of monetizing non-producing acreage and swapping it for cash generating production. This is simply them returning to the original business model.
I own LNCO (and DRIP my distributions), so I am pleased to see continued efforts to shore up the company. The divestiture of the Granite Wash and Wolfcamp II should now likely be the focus. Also expect the Cleveland Sands to be divested. Will be interesting to see company total decline rate pro rata for these pending transactions (both the acquisitions and divestitures). I'm guessing it will easily be sub 20% and perhaps closer to 10% than 20%. A step in the right direction to reshaping the company from a hybrid aggressive driller back to an arbitrage machine.
Norris, you are incorrect as always. Innuendo and accusations, but never data. It's you m.o., it's tired and weak and the board recognizes you as the board clown.
That being said, I notice that even you now understand the swap cliff. It was something I pointed out several years ago, but you dismissed it as immaterial. Shall we also discuss the glaring absence of oil hedges several years out and the backward dated futures market? I'm sure you will have a whopper of a tall tale to explain that issue away as well. Face the facts. We've been calling Linn, Linn bond for years due to the massive size and the fact that the law of large numbers makes it increasingly difficult for them to grow at anything above pedestrian rates. Oh, but sandforbrains still has a few months to redeem himself. Perhaps a surprise increase at the end of the year? Seems unlikely.
Now, you seem to have awoken and realized that yes, the natural gas problem exists, it is real and must be dealt with. This was after countless posts by you where you denied that Linn's margins were shrinking (yes, norris, I saved references to them!). You babbled on and on about locking in margins at current prices but failed to realize that once those hedges run out, you have to take what the market gives you. Nevertheless, the problem is recognized by the street and they have assigned an appropriate yield, taking into consideration decline rates, prospects, reserve life, hedges, debt heavy balance sheet and futures. Only when management addresses the issues will the market assign a lower yield.
But as I mentioned, it is not insurmountable and the company achieving and maintaining a prudent coverage ratio will help manage the cliff.
Yes, natural gas swaps have a fairly significant drop in '16, to the tune of around a $100 million drop annualized based on price and volumes. That's around $.30/unit or ~10% of the distribution.
That's not an insurmountable obstacle, but it does emphasize why Linn needs to run with a 1.10x or better coverage ratio (which would give them roughly $100 million in surplus DCF at the current unit count and distribution rate). That surplus DCF can be reinvested as growth capital back into the business without the need to raise equity or debt.
It is also why the Berry deal, the ExxonMobil swap, the Devon deal and the pending Granite Wash (and perhaps Wolfcamp II) are so vital to Linn getting back on track, reducing their overall corporate decline rate, reducing their dependence on aggressive drilling, high grading their drilling prospects in order to increase capital efficiency and getting the coverage ratio high enough such that they can weather both the drop in natural gas swaps as well as the dwindling oil hedges (price, volume and duration).
It is also why I don't believe Linn will be able to achieve anything more than 3-5% annualized distribution growth. They are too large and it is becoming harder and harder to drive accretion across 330+ million units.
High volume days continue, mixed in with some extremely low volume days. Would not be surprised to see PostRock file again within the next couple of weeks and see their holdings under 3 million.
The low volume days really hurt them, given their position and their goal of being fully divested by year end, it looks like they need to divest 20,000 units per trading day. Not an enviable task, but clearly a huge positive to CEP to have those charlatans out of the picture and of course, the CEP will be awash in liquidity.
The coming Q will be interesting and I think we may see an earnings announcement that is coupled with an acquisition announcement as well. Would love to see a nice $20-$40 million purchase from Sanchez, with more than half of it financed with equity. That would strengthen the balance sheet and keep leverage low while giving them more room on the borrowing base. If CEP can string together a few nice acquisitions of mature producing assets and continue to exhibit strong capital efficiency from their internal drilling program, it remains possible for them to initiate a modest distribution.