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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: farmerboy who wrote (96822)	2/15/2008 8:12:23 AM
From: Ed Ajootian	Read Replies (1) of 206325

farmer, Linn Energy (LINE) -- Thanks very kindly for sharing that, its most helpful. I like the way these guys think, calling for '08 EBITDA to come in at $580 M vs. Lehman's call of $544 M. If Citi is right, Linn would generate distributable cash flow of about 18% more than their distributions, assuming the $2.52 distribution rate stays fixed. To get from EBITDA to distributable cash flow I'm subtracting $125 M for interest and $115 M for mainenance cap ex (each of which are per Lehman). I also would point out that Citi's numbers are conservative given that they have not changed their '08 estimates since their last report (which apparently was on 2/1/08) even though natty prices have gone pretty idiotic since that time. As mentioned they stand to benefit a bit from higher natty prices due to the use of some puts in their hedging. As shown at exhibit 2 of the Lehman report, Linn has $7.99 puts on about 11 BCF of gas production for '08. So if you figure gas will average $9 vs. $7.99, they stand to pick up another cool $10 M of EBITDA or so.

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