Houston-based Linn Energy LLC (Nasdaq: LINE) will spend $525 million on Permian Basin assets to increase production.
Linn Energy did not reveal the seller in its Thursday statement. The purchase, which Linn will pay for with debt, will add production equivalent to 4,800 barrels of oil a day in the first year, Bloomberg reports.
LINE to buy more Permian production
LINE to buy more Permian production
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: LINE to buy more Permian production
If they close the acquisition of BRY, LINE will be back in the mid $30's quickly.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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prince_jake_33
- Posts: 242
- Joined: Mon Apr 26, 2010 2:21 pm
Re: LINE to buy more Permian production
Dan and Cayman I see from the quarterly report an income of 488,200,000 $ from oil,nat gas and nat gas liquids and an income of 326,733,000 $ from derivatives. Are the derivatives income steady and continuing? 
Re: LINE to buy more Permian production
No, the "Income" from derivatives is just the stupid mark-to-mark adjustment on their hedges that is required by GAAP accounting in the Post-Enron era. The majority is a non-cash item. Focus on cash flow per share, not earnings.
All E&P companies, including the upstream MLPs have this reporting requirement. IMO it is very confusing to investors and a gross over-reaction by the SEC and accounting profession to the Enron meltdown. Enron's real problem was fraud related to investments in partnerships, not their commodity trading group.
If you go to the actual SEC filings for each quarter you can see the "realized" and "unrealized" gains and losses on their hedges. For example, if LINE sells oil in the market at a price above the ceilings on their collars for that quarter they will have a realized loss when they have to write a check to the counter-party on the hedges. This is a hard concept for most investors to get their mind around. They actually sell the production in the market at the going price and record that as income, but they also have to pay on the hedges and record that as a realized loss on the hedges. The opposite is true if the market price is below the floor of their hedges.
The mark-to-market adjustment on the value of the hedges for future periods is a non-cash item and usually reverses in the next period.
All upstream MLPs hedge a very high percentage of their future production. This is a good thing as it significantly reduces their exposure to commodity price swings.
Read our recent profiles on BBEP and VNR to get more education on this issue.
All E&P companies, including the upstream MLPs have this reporting requirement. IMO it is very confusing to investors and a gross over-reaction by the SEC and accounting profession to the Enron meltdown. Enron's real problem was fraud related to investments in partnerships, not their commodity trading group.
If you go to the actual SEC filings for each quarter you can see the "realized" and "unrealized" gains and losses on their hedges. For example, if LINE sells oil in the market at a price above the ceilings on their collars for that quarter they will have a realized loss when they have to write a check to the counter-party on the hedges. This is a hard concept for most investors to get their mind around. They actually sell the production in the market at the going price and record that as income, but they also have to pay on the hedges and record that as a realized loss on the hedges. The opposite is true if the market price is below the floor of their hedges.
The mark-to-market adjustment on the value of the hedges for future periods is a non-cash item and usually reverses in the next period.
All upstream MLPs hedge a very high percentage of their future production. This is a good thing as it significantly reduces their exposure to commodity price swings.
Read our recent profiles on BBEP and VNR to get more education on this issue.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group