Feeling pleaseed with my KMI purchase last week. The press release by Kinder Morgan reiterating the dividend growth projection at KMI and distribution growth projection at KMP must have calmed the nerves of some of the retail investors. It surprises me that a simple reiteration results in such a pop. Oh well, I'll take it. A nice 5% yield, high single digit growth rate, well diversified platform. Not a home run stock, but a nice addition to the income portfolio that will crank out nice, steady, growing income for years to come.
As for Linn, I've been averaging down my LNCO. Another $.40 pop and I'll be back in the green! Listening to the Legacy call, it sounds like a lot of the large c-corps are continuing to jettison natural gas properties to fund oil development. We might see Linn pick up some natural gas properties as well and likely outside the Permian, which is very hot and prices are steep (per Legacy conference calls). Now Linn has the wind at its back rather than a headwind. Coverage projected to be above 1.0x, a potential windfall from the Wolfcamp which will result in either increases in the distribution or at the very least, an increase in coverage. An exchange would result in the acquisition of mature production, which will also allow them to once again lower the capital budget. That removes more return uncertainty on the new wells (Hogshooter anyone). I would not be surprised at all to to see 2015 have a reduced budget compared to 2014.
I'll gladyly take these two market gifts...perhaps the MLP sector will produce some more bargains soon. LGCY is starting to look very tempting. At $25 or less, it becomes a real steal.
I bought KMI today and more LNCO to go with my position initiated over the past few days.
I trust Rich Kinder more than Cramer. Cramer only superficially understands the MLP sector, and frankly, there is no way he can cover so many equities. He relies on his staff and experience to make judgements. He does entertain though and that is why the show is popular, not because of his accuracy.
At today's prices, I view KMI as a very good buy. 5%+ yield on an equity that should be able to achieve mid to high single digit dividend growth.
At $28, I also view LNCO as a steal. Post Berry closing it is a different company. We shall see if distribution growth materializes in '14 or if we wait till '15 but coverage is slated to be above 1.0x and that is with a reduced capital budget compared to the combined budgets of last year.
Thanks Mr Market for not only the gift, but giving it right after quarterly distributions and dividends arrived.
I wasn't completely incorrect. They hedge the oil at a blend of Brent and WTI, which gives them a premium to WTI on a blended average.
You get points for effort though..keep trying.
Think whatever you like. I deal in facts, not feelings.
The facts say that Linn's capital budget is not meaningfully geared towards the Oklahoma Hogshooter.
Also, Linn isn't at $40..
Please pin point the "detailed" analysis.
You seem frustrated that Linn is achieving average weighted pricing above WTI (per the conference call).
But, as I've said before, the shift in production weighting from gas to oil will be very beneficial.
You've fabricated, twisted and distorted numerous times.
In all cases, when confronted you have never provided any confirmation, especially when dealing in innuendo and accusations. But that has been your m.o. for some time.
I like how you disappeared during the Hedgeye and Berry merger fiasco. Couldn't take the heat?
I also like how when backed into a corner regarding the lack of meaningful Hogshooter drilling that you resort to changing the subject and pretending like it isn't a big deal. Guess what, it isn't a big deal because the returns turned out to not be nearly as strong as originally anticipated and Linn has opted to deploy the bulk of their capital elsewhere.
It seems like a reasonable back of the envelope estimate based on comparable peers and recent private and public market transactions of acreage and of course know flowing barrel valuation metrics for existing production.
If you want a similar analog, look at EVEP, which is looking to divest it's Utica acreage. It's very possible that you'll see these parcels/packages go out in spurts as opposed to one large deal encompassing all of their acreage.
Actually a more direct comparison is Legacy Reserves, which is also looking to JV or monetize some of their Permian Wolfcamp. LGCY management has spoken on numerous conference calls to the difficulty of these deals because it often involves 2 or 3 operators. Large acreage blocks will be the easiest to divest.
It will be interesting to see how it unfolds.
Yes, I too was amused. Some clown named vattars accused Liza of being a paid basher (on the NDRO board) earning $50K a year. Can you believe that people actually believe that silliness!
They mentioned on the conference call how they hedged it as a blend (yes, I listen to the calls, despite what you may think).
The point remains the same, as Brent trades at a premium to WTI, the blended average that they receive is better than straight WTI pricing.
Actually Memorial (MEMP) had some good commentary on their pricing when they made their California acquisition last year. Worth listening for those that re interested.
Go back in your hole. As I've said before, I'm not going away, so get used to it.
LOL, you claim you didn't read my post, but then have rebuttals for items throughout! Thanks for the laugh.
And I like how you continue to fabricate things out of thin air. Everyone knows they shifted to the Oklahoma side in the panhandle. It was clearly broadcast. You'll remember, a lot of the bashers made note of the fact that Linn's working interest was much lower on the Oklahoma side. But what is more relevant is that Linn's total capital expenditure in the Oklahoma side of the Hogshooter is a very miniscule part of the whole budget. Not really a ringing endorsement..but then again, we all knew that.
Also you can clearly see what the pie graph clearly shows, and I actually got confirmation from Clay at IR regarding the 2014 Hogshooter drilling...but you will have to get your own confirmation. Hint, it isn't a material part of the 2014 budget...but go ahead and continue to tell us how great the IP rates are, when everyone in industry knows that IP rates are not very reflective of total production from the well.
As for acquisitions, yes, we may see them in '14, and they may come indeed be in the $5.5 -10 billion range. But as I said before, if Linn makes $5.5-$10 billion in acquisitions in '14, one should expect at least marginal distribution growth from such an effort.
I see you are still fixated on IP rates rather than overall returns. But despite your nonsense, the breakdown of Linn's 2014 capital budget tells us everything we need to know about the company no longer relying on the Hogshooter. Shall you break out the calculator and show us what percentage of total funds are being allocated to it during '14? Nah, didn't think you wanted to do that. But in case you do, you can look at slide 2 of the 4th Quarter Supplemental results presentation. They have a large, multi-colored pie chart. You can't miss it.
Also, I like how you feel vindicated by Linn achieving $42.59, the only problem is that the NYSE shows Linn closed today at $29.74, not $42.59. Remember, close only counts in horseshoes and hand grenades...also remember, it's not what price they were at, it's what price it is at today (the market is forward looking)
And I never said that Linn wouldn't raise the distribution in '14. I simply stated I am not displeased as others appear to be that the Berry deal didn't materialize into the bump to $3.08 (as originally projected by Linn management). If they make acquisitions of those amounts, that will likely lead to increased distributions, but then again, one would only assume that $5 billion to $10 billion in acquisitions would result in a distribution increase...
In fact, I'm quite pleased with the Berry deal. It has radically changed the company, whether the shorts wish to acknowledge it or not is of no concern to me. The California secondary recovery steam flood oil assets with Brent pricing are quite attractive. Notice even little Memorial (MEMP) made a nice California oil deal last year. The increased footprint in the Permian and East Texas also bring economy of scale to those areas. The overall shift of the portfolio from gassy to oily and liquids rich is good for them not to mention the huge deleveraging that took place by issuing equity.
In typical fashion, you post yet say very little unless you are just directly copying and pasting as you are fond of doing. And yes, you did make such a comment regarding Credo. But we won't rehash that old argument again. I as recall, you and norris were still deficient in proving many remarks that you attributed to me, but could never produce proof of when the time came.
As for the comments above (presumably taken from the NDRO board), yes, they were said tongue in cheek. Liza made comments about the inferiority of royalty trusts to E&P MLPs (i.e. not being able to acquire more acreage and production and in essence being a depleting asset). I agreed. A 3rd party commented that Liza must be a paid basher and said bashers were paid $50K a month. I gladly offered my services for half the amount listed. Still waiting on a reply. I doubt many would argue that a royalty trust is better than an E&P MLP, especially the garbage royalty trusts that were issued recently. Some of the older ones issued by the Brumley's and Bob Simpson (CRT, PBT, SJT and SBR) are not bad investments if purchased at the right time. SBR has significant undrilled Permian acreage, and true mineral royalties, not working interests.
Oh, and while I am buying LNCO over the past few days and today, I still can't help but chuckle about how Linn bond isn't at $40, the Hogshooter has become all but a minor part of Linn's growth cap ex in 2014 when you had the future of the company pinned on it a year ago and vehemently defended anyone that even suggested it might be a bit reckless to bet the company on a play that was by no means mature or fully delineated. In short, you are a cheerleader with rose colored glasses.
Now, all of that aside, I actually think LNCO is a great deal sub $29. While others are miffed at lack of '14 distribution growth, I'm quite pleased with the Berry deal. It removed a lot of risk, and despite what some say, it was accretive and clearly in the best interest of the company.
No I don't follow them, I'm pretty sure that GMXR folded. A great example of a company that was too late to the game of diversification. They were at one time a huge player in the Haynesville, realized when prices dropped that they needed oil exposure. They bought Bakken and Niobrara acreage from what I recall, but they didn't have enough capital to develop it, and they weren't an operator if I remember correctly and didn't get very good results from the Bakken (not in the sweet spot). Glad I didn't buy any!
But was happy to make money on the tiny Credo that had a fabulous shallow vertical oil play in Nebraska and Kansas going for them. They did get taken out by Forestar. Those guys were drilling wells that while very small in terms of production but were paying out in 6 months from what I remember because the cost to drill them was so cheap (truck mounted rigs). I remember because you made a sarcastic comment calling them Crapo. No matter, I made money anyway. It's a case of people being enamored with IP rates rather than rates of return.
I would be interested though in finding out who purchased the GMX assets out of receivership. Their Haynesville assets, now 4 or 5 years mature would seem like ideal MLP assets now that the production is in the flat part of the decline curve and manageable from a cash flow profile..and you can likely buy the production and get the PUDs for free since Haynesville isn't economic at these prices. If gas prices pop, you have an inventory of nice PUDs to drill, if not, you didn't pay anything for them anyway.
Several of the E&P MLPs have been venturing into the more mature shale plays such as the Barnett and it seems enevitable that we will see acquisitions of Fayetteville and perhaps even Haynesville in the near future.
It shocks me that people so quickly forget how positive the Berry deal was for Linn.
The increase in the ratio to complete the Berry deal may have hampered their ability to raise the distribution meaningfully in '14 (if at all), but it tremendously altered the risk profile of the company. It shifted their leverage back to a more appropriate and acceptable level (Berry deal was all equity, though they obviously assumed Berry's existing debt). The other point that appears lost on most of the investors is the obvious shift in commodity mix that Berry brought, pushing Linn from being gas heavy to oil heavy. And not only are they oil heavy, but their California production is selling at Brent prices, not WTI.
The final component that is overlooked is that Berry's PUDs have a much higher IRR than many of Linn's existing properties. Linn walks a fine line of buying mature production but also having a core of high IRR PUDs to drill for both maintenance but also for overall production growth. The inclusion of Berry's superior return assets allows Linn to achieve higher overall blended IRR's on their growth capital, which has allowed them to reduce their capital budget by $200 million yet achieve similar returns. This in turn helps reduce the company overall blended decline rate, which had become very difficult to manage (mid 30%).
Finally, the possibility of a JV, divestiture or farm out, asset swap etc of the Wolfcamp/Wolfberry may allow Linn to meaningfully reduce the overall decline rate yet again, by reducing the number of new high decline wells (numerator) and by increasing the base of low decline ("mature") production (denominator). So, they get a double gain on the transaction (assuming a divestiture or swap).
I added LNCO again today and am quite pleased with a near 10% yield. This company is returning to the traditional E&P MLP model and reducing risk by avoiding putting so much capital into growth, which we have seen can be volatile (Hogshooter primarily).