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San Juan Basin Royalty Trust Message Board

rrb1981 147 posts  |  Last Activity: 10 hours ago Member since: Apr 18, 2001
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  • goskiing99,

    Agreed. Ellis really punted on the earnings call. Again, he either was saying they have no clue what they are doing, or they know a distribution cut is almost certain. They really haven't done themselves any favors.

    One must remember that while Ellis really screwed up with the fiasco of the Granite Wash and Hogshooter, he did have the misfortune of walking into a company that was burning off the last of their fabulous '08 hedges. As those ran off, Linn was forced to layer on hedges at much lower prices, hurting their margins and necessitating them to make countless acquisitions to shore up the depleting DCF.

  • Reply to

    Pantz Up - Don' t Loot !!!!

    by stenchcloud 19 hours ago

    "How about avoiding such areas that are known bad spots and corrupt. Instead of looking for confrontation"

    Who said anything about looking for confrontation? No one in this nation should feel intimidated to go anywhere. That Is why concealed carry is so important. Criminals don't know whether victims are armed or not. Note that crime in states where concealed carry is allowed is much lower.

  • jagan1961,

    I don't think you clearly understand the Berry arrangement. Berry's value is not intact or preserved.

  • Reply to

    Pantz Up - Don' t Loot !!!!

    by stenchcloud 19 hours ago

    ghondula,

    Yes, the criminals will never abide by the laws...that's why they are criminals. It really is quite comical to listen to liberal logic.

  • Reply to

    Pantz Up - Don' t Loot !!!!

    by stenchcloud 19 hours ago

    I had heard on TV that Sharpton was in arrears on his taxes, but do not know any details.

    As for police, agree fully, not all of them are good, but I believe by far that most of them are good and mean well. It is not a financially rewarding career and requires a lot of sacrifices so clearly, those entering the field are likely doing so because they desire to protect and serve.

  • Of interest will be what happens to Quicksilver's world class Barnett Shale assets once KWK finally slips into bankruptcy.

    That production will be highly desired by MLPs due to its high quality, relatively low decline and heavily developed infrastructure in the basin as well as a generally favorable drilling environment.

    I expect Enervest and EVEP will be interested, as will Linn.

  • Reply to

    Pantz Up - Don' t Loot !!!!

    by stenchcloud 19 hours ago

    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 19 hours ago

    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 19 hours ago

    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.

SJT
14.01+0.08(+0.57%)Dec 19 4:00 PMEST

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