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Business, Finance, Occupation & Industry

What's LINN Energy Worth?

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By Matt DiLallo, The Motley Fool

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Over the past month or so LINN Energy has been under a bit of an attack from short sellers. The company has been quick to respond to these comments and its most recent response (link opens a PDF) had a very detailed analysis of its net asset value. It’s always a good idea to have at least some basis for what an investment is worth, so let’s drill down into LINN’s net asset value.

LINN’s recent presentation provided investors with two different analyses of its net asset value. One is the company’s internal analysis and the other came from a third-party advisor. Both showed that LINN is currently undervalued, and possibly has an upside of up to 70% even before taking the company’s recently announced Berry Petroleum  merger into account. Let’s take a look at what this all means to current and potential LINN Energy investors.

LINN’s own internal analysis implies an equity value of $44.74-$64.74 per unit. The foundation of its analysis is its proved reserves, which when you add it all up, gives a base value of $8.8 billion. These reserves include both proved developed and unproved developed which are believed to hold approximately 5 trillion cubic feet of equivalent, or Tcfe, of reserves.

One thing I will point out is that in LINN’s valuation it is using a PV-7.5 instead of a more traditional PV-10 value. What it’s doing is taking the present value of these reserves and not discounting it as deeply. Given LINN’s low cost of capital, and the fact that these are known reserves, it’s not using an overly aggressive rate but it is something an investor needs to know.

In addition to the reserves that LINN has in place, it owns a gas processing plant that it acquired from BP in the Hugoton deal last year. At the time the plant was just 41% utilized giving it significant excess capacity and future upside. LINN has value in its hedge book as well as additional assets and facilities that hold value. Together, these assets add another $1.3 billion in value to the company.

From here the value gets a little more complicated and is more open for debate. LINN has a significant inventory of future drilling sites which could possibly yield upwards of 14 Tcfe of reserves. A large portion of this future potential is located in its Granite Wash acreage which could deliver 5.2 Tcfe of future production, however, in order for that production to be realized, gas needs to move above $4.70 per MMBtu after 2018 and oil needs to remain above $90 per barrel.

When you incorporate this future potential it adds significantly to LINN’s net asset value. Using both PV-15 and PV-10 rates these reserves could add between $6.5 billion and $11.2 billion to the company’s value respectively. Taking that top number, and netting out its debt, it implies a value upwards of $65 per unit.

LINN’s third-party …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

LINN Energy Makes a Return

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By Matt DiLallo, The Motley Fool

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After spending billions to build up its oil and gas reserves, LINN Energy and its partners are now on the selling end of a transaction. LINN, along with Panther Energy and Red Willow Mid-Continent, announced the sale of properties in the Anadarko Basin to Midstates Petroleum for $620 million in cash. LINN originally acquired its 40% stake in the properties for $220 million back in 2011.

The producing properties encompass 140,000 net acres and proved reserves of 34.4 million barrels of oil equivalent that are 45% oil and 21% natural gas liquids. It adds 8,000 barrels of oil equivalent production per day to Midstate’s production base. Further, it adds over 700 low-risk, repeatable horizontal drilling opportunities. It’s a good deal for Midstates because it’s accretive to cash flow, reserves, and production.  

When LINN acquired its share in the properties almost two years ago CEO Mark Ellis noted: “The acquisition of these properties enhances LINN‘s overall position in the Texas Panhandle area, and marks our entry into the liquids-rich window of the horizontal Cleveland play in the Anadarko Basin.” He further noted: “Partnering with Panther will align us with an experienced and efficient operator that has been active and successful in this area for several years. This acquisition provides high rate-of-return projects and we expect it to be immediately accretive to our unitholders.” However, the opportunity to cash out now appears to be the more attractive option.

The company did note when it originally acquired its stake that what was attractive about the asset was its high rate of returns and quick payback. After less than two years of ownership, the asset is certainly living up to that quick payback. However, given how active LINN has been at purchasing assets, I’m surprised that it didn’t bid for control of the asset.

Instead, LINN is cashing in and will likely deploy the cash elsewhere. LINN, and affiliate LinnCo are in the midst of acquiring Berry Petroleum so the company does have a lot on its plate as its works toward closing that massive deal. What this does demonstrate is that LINN really is a disciplined acquirer of assets, and won’t make a deal just to grow. Instead, it focuses on those transactions that can move the needle and add to its distributable cash flow.

As a LINN Energy or LinnCo investor, a transaction like this should give you confidence that LINN is operating the company with returns in mind. This is not a company seeking growth at all costs; it’s focused on steadily growing its distribution to unitholders. I continue to believe in the LINN story and think it’s one worth believing in for a long, long time.

LINN represents just one of the many different ways to play the energy sector. While I prefer the company, it might not be right for your portfolio. If you’re looking for something a bit different, The Motley Fool’s analysts have …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Berry Petroleum Working Hard Enough for You?

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By Seth Jayson, The Motley Fool

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Margins matter. The more Berry Petroleum (NYS: BRY) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That’s why we check up on margins at least once a quarter in this series. I’m looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Berry Petroleum‘s competitive position could be.

Here’s the current margin snapshot for Berry Petroleum over the trailing 12 months: Gross margin is 65.3%, while operating margin is 37.5% and net margin is 17.6%.

Unfortunately, a look at the most recent numbers doesn’t tell us much about where Berry Petroleum has been, or where it’s going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can’t make up for this problem by cutting costs — and most companies can’t — then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company’s profitability. That’s why I like to look at five fiscal years’ worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can’t always reach a hard conclusion about your company’s health, but you can better understand what to expect, and what to watch.

Here’s the margin picture for Berry Petroleum over the past few years.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of seasonality in some businesses, the numbers for the last period on the right — the TTM figures — aren’t always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

Here’s how the stats break down:

  • Over the past five years, gross margin peaked at 66.3% and averaged 62.3%. Operating margin peaked at 37.5% and averaged 17.2%. Net margin peaked at 17.9% and averaged 6.5%.
  • TTM gross margin is 65.3%, 300 basis points better than the five-year average. TTM operating margin is 37.5%, 2,030 basis points …read more
    Source: FULL ARTICLE at DailyFinance
Business, Finance, Occupation & Industry

3 Attractive Acquisition Targets for Oil Majors

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By Tyler Crowe, The Motley Fool

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For a major oil and gas company to meet its production growth targets, it takes a lot of capital and a little luck. If it can’t meet those production goals through exploration, the company may go out and buy a company or two. For example, when ExxonMobil wanted to get in on the shale plays in Alberta last year, it bought Celtic Exploration for $2.6 billion. The deal bolstered the company’s holdings in the area by about 139 million barrels of oil equivalent of proved and probable reserves, a much-needed boost for a company that has struggled to meet its production goals as of late.

Like investors, major oil companies are always looking to get value out of their purchases. Today, let’s look at a way to value a company for an acquisition and see if there are any companies that could be on he block for potential buyout.

Getting bang for your buck
While there are certainly some very complicated methods for evaluating an energy company, a quick and dirty method is to see how the enterprise value of the company (all equity and debt minus cash) compares to the total proved reserves on the company’s books. For example, Berry Petroleum , which was just acquired by LINN Energy for a final price tag of $4.3 billion, had just over 274 million barrels of oil equivalent in proved reserves. This means that the company paid about $15.33 per barrel of oil equivalent for the company’s reserves. Based on an S&P Capital IQ screen of exploration and production companies with a total enterprise value between $4 billion and $45 billion, an average company in this space would have an enterprise value per barrel of oil equivalent of $21.53. So based on this metric, it appears that LINN didn’t overpay for this asset.

There is also one thing to consider when using a metric like this. Companies evaluate barrel of oil equivalents based on a BTU equivalency, but gas and oil spot prices trade at very different rates than this basis. For example, a gas-heavy company like Ultra Petroleum would have a value of about $9.69 per barrel of oil equivalent. This is misleading because over 95% of its reserves are in gas. Keep this in mind if you do this kind of calculation on your own.

Using this method for evaluating companies, let’s take a look at a couple companies that could be selling at a deep discount.

Devon Energy
Some people might see Devon’s $11 billion in debt as a little too much bulk for a $28 billion. But with an enterprise value of $8.97 per barrel of oil equivalent, Devon could be a great deal for someone who wants a well-diversified portfolio. Overall, Devon itself is pretty well-diversified, with about 47% of proven reserves in oil and natural gas liquids. One of the possible reasons for the lower price tag may be that the company has 68% of all its proven …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Law Firm Brower Piven Announces Investigation of Berry Petroleum Company Proposed Acquisition

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By Business Wirevia The Motley Fool

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Law Firm Brower Piven Announces Investigation of Berry Petroleum Company Proposed Acquisition

STEVENSON, Md.–(BUSINESS WIRE)– The securities litigation firm of Brower Piven, A Professional Corporation, has commenced an investigation into possible breaches of fiduciary duty to current shareholders of Berry Petroleum Company (“Berry Petroleum” or the “Company”) (NYSE: “BRY”) and other violations of state law by the board of directors of Berry Petroleum relating to the proposed acquisition of the Company by Linn Energy, LLC (“Linn”) and LinnCo, LLC (“LinnCo”). The firm’s investigation seeks to determine, among other things, whether Berry Petroleum‘s board of directors breached their fiduciary duties by failing to maximize shareholder value.

According to the press release announcing the proposed acquisition, Linn and LinnCo will acquire all of Berry Petroleum‘s outstanding shares for total consideration of $4.3 billion, including the assumption of debt. The proposed acquisition is structured as a stock-for-stock merger of LinnCo with Berry Petroleum, followed by the acquisition of Berry Petroleum‘s assets by Linn. The Company’s shareholders will receive 1.25 common shares of LinnCo for every Berry Petroleum common share they own. According to the companies’ joint press release, the consideration to be received by the Company’s shareholders is valued at $46.2375 per Berry Petroleum share based on LinnCo’s closing price as of February 20, 2013. According to Yahoo! Finance, the high analyst price target is $50.00 per Berry Petroleum share.

If you currently own common stock of Berry Petroleum and would like to learn more about the investigation being conducted by Brower Piven, you may email or call Brower Piven, who will, without obligation or cost to you, attempt to answer your questions. You may contact Brower Piven by email at hoffman@browerpiven.com, by calling (410) 415-6616, or at Brower Piven, A Professional Corporation, 1925 Old Valley Road, Stevenson, Maryland 21153. Attorneys at Brower Piven have combined experience litigating securities and other class action cases of over 60 years.

Brower Piven, A Professional Corporation
Stevenson, Maryland
Charles J. Piven, 410-415-6616
hoffman@browerpiven.com

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The article Law Firm Brower Piven Announces Investigation of Berry Petroleum Company Proposed Acquisition originally appeared on Fool.com.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Law Office of Brodsky & Smith, LLC Announces Investigation of Berry Petroleum Co.

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By Business Wirevia The Motley Fool

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Law Office of Brodsky & Smith, LLC Announces Investigation of Berry Petroleum Co.

BALA CYNWYD, Pa.–(BUSINESS WIRE)– Law office of Brodsky & Smith, LLC announces that it is investigating potential claims against the Board of Directors of Berry Petroleum Co. (“Berry Petroleum” or the “Company”) (NYS: BRY) relating to the proposed acquisition by an affiliate of Linn Energy LLC (“Linn Energy“).

Under the terms of the transaction, Berry Petroleum shareholders will receive only $46.24 in cash for each share of Berry Petroleum stock they own. The investigation concerns possible breaches of fiduciary duty and other violations of state law by the Board of Directors of Berry Petroleum for not acting in the Company’s shareholders’ best interests in connection with the sale process to Linn Energy. The transaction may undervalue the Company and will result in a loss for many long term shareholders. For example Berry Petroleum stock traded at $55.74 as recently as February 28, 2012 and $60.24 on July 25, 2011. In addition, an analyst has set a $50.00 per share price target for Berry Petroleum stock.

If you own shares of Berry Petroleum stock and wish to discuss the legal ramifications of the proposed transaction, or have any questions, you may e-mail or call the law office of Brodsky & Smith, LLC who will, without obligation or cost to you, attempt to answer your questions. You may contact Jason L. Brodsky, Esquire or Evan J. Smith, Esquire at Brodsky & Smith, LLC, Two Bala Plaza, Suite 602, Bala Cynwyd, PA 19004, by e-mail at investorrelations@brodsky-smith.com visiting http://brodsky-smith.com/544-bry-berry-petroleum-co.html, by calling toll free 877-LEGAL-90.

Brodsky & Smith, LLC
Jason L. Brodsky, Esquire
Evan J. Smith, Esquire
877-LEGAL-90
investorrelations@brodsky-smith.com
http://brodsky-smith.com/544-bry-berry-petroleum-co.html

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The article Law Office of Brodsky & Smith, LLC Announces Investigation of Berry Petroleum Co. originally appeared on Fool.com.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Where LINN Energy Plans to Grow in 2013

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By Matt DiLallo, The Motley Fool

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Oil and natural gas income giant LINN Energy is out with its 2013 capital spending plan. With more than 10,000 prospective drilling locations across its more than half dozen core operating areas, LINN has plenty of options with which to invest its capital. Let’s drill down and examine where LINN will be looking to boost its organic production growth in the year ahead.

A quick look back
Last year, LINN drilled 440 gross wells, with only four of them coming up dry. Those wells cost the company around $1 billion and boosted organic production by 15%. They also helped the company to produce a reserve replacement ratio of about 150% if you exclude price-based revisions and undeveloped reserves more than five years old. Those were great results for the company, which is expecting even more in the year ahead.

Drilling down into the 2013 capital budget
LINN plans to spend $1.1 billion on developing its oil and liquids-rich acreage. That money will allow LINN to drill or participate in about 500 wells over the next year. If everything goes according to plan, those wells should help LINN deliver another year of double-digit organic production growth.

The money will be split across its portfolio:

Source: LINN Energy Investor Presentation.

The Granite Wash is far and away the most important growth asset for LINN at the moment. The company is planning to spend more than a third of its capital to drill 80 wells into the play. The liquids-rich Hogshooter formation will continue to be the key target area for the company, as it generated excellent returns in 2012. Aside from that, the Permian Basin will see its share of capital in the coming year. While it is getting just 18% of the capital, LINN will use it to drill nearly 100 wells. Finally, the most interesting aspect of the drilling budget, in my opinion, is that LINN will be spending a great deal of capital to further develop its Jonah Field, which it acquired from BP last year, while spending minimally on the Hugoton assets, which it also bought from BP last year.

Jonah is more of a gas asset, as 73% of production is natural gas. It also has a higher decline rate of 14%. Hugoton’s production, on the other hand, has a lower decline at 7%, while it’s just 63% natural gas. The likely reason for the focus on Jonah is that the company will be participating with Encana on approximately 58 wells while only drilling 18 wells that LINN will operate. That makes more sense, especially when you consider that Encana is one of the few companies that’s still drilling for natural gas these days.

Harvesting future fruit
While the deal won’t close until the second half of the year, LINN’s purchase of Berry Petroleum in conjunction with its affiliate LinnCo will add even more organic production growth. Before the deal was announced, Berry …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Linn Energy to buy Berry Petroleum for $4.3 billion in stock

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(Reuters) – Oil and gas producer Linn Energy LLC said it would buy Berry Petroleum Co in an all-stock deal valued at $4.3 billion including debt, giving it more exposure to lucrative liquids that will help it raise production by 30 percent. Berry shareholders will receive the equivalent of about $46.24 per share, a 19.8 percent premium to the stock‘s closing price of $38.59 on Wednesday on the New York Stock Exchange. (Reporting by Swetha Gopinath in Bangalore; Editing by Roshni Menon) …read more
Source: FULL ARTICLE at Yahoo Business