Buy Price: $14.63
Based on our continuing analysis we have decided to add to our initial LINE position. In reviewing Q4 2008 results, it is no wonder that LINE has decreased since our initial investment. We projected Q4 revenues at $150-$170m unhedged, $175-$201m hedged, actual results were far lower unhedged ($85m). Fourth quarter energy prices were far lower than we had anticipated and fires in the Southern California oil field contributed to the below normal production levels. With that said, hedged revenues came in just slightly lower than our projected range at $171m. This quarter has shown first hand the power of the LINE hedging portfolio. We expect Q1 2009 to be no different with $85 - $95m in unhedged revenues; $185 - $195m hedged realized revenues. We anticipate full year distribution coverage to be above 1.1 and look forward to the full year distribution of $2.52 to be paid without any problems (approx. 17% yield).
The Bottom Line:
Long 5%
We are adding 5% of our portfolio to purchasing additional LINN Energy to bring the total to approximately 10% of our total portfolio.
1 comments:
With the current recession and lower demand it seems that oil prices will probably remain with a possible slight increase over the next few years...However, the great thing about LINE is you know they have so much hedging that oil prices are much less of a worry short term. There seem to be few scenarios in which oil prices will actually be lower when their hedging contracts expire...
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