LINN Energy LLC, the nose-diving owner of the company that operates the Placerita Oil Field, took another hit Friday when another analyst downgraded its shares to “sell” and said bankruptcy is right around the corner.
“We believe the company will likely file for Chapter 11 after the next round of borrowing base redetermination and/or post a covenant breach,” said oil and gas analyst Faisel Khan of Citi Research, who recommended dumping the stock and gave a price target of $0.
LINN announced Feb. 4 it was drawing down the balance of its credit line to cover regular business expenses and that it has regained a merger and restructuring expert to aid its balance sheet. It also said adopted an incentive program whereby company CEO Mark E. Ellis and other senior executives would receive hefty bonuses if they stay on board throughout the quarter, and millions more if they stay the full calendar year.
Shares of the Houston-based LINN and its affiliate LinnCo were trading around $30 when they purchased the Placerita operator Berry Petroleum Co. a little over two years ago for $4.9 billion. Berry shareholders were to receive 1.68 LinnCo shares for each Berry share.
If they held onto their shares, they saw their investment slip away as oil prices fell over the last two years. LINN shares were valued at only about $1 when the companies made their Feb. 4 announcement; as of Friday, LINN shares were trading for 38 cents and LinnCo for 17 cents.
Khan of Citi said LINN’s unsecured creditors are unlikely to recover anything.
“Based on current transactions we see in the market and including $1.9 bil. in hedges as well as cash on the balance sheet, we believe that the recovery factor on Linn’s unsecured credit will be low. This is reflected in the company’s bond prices that are trading at pennies to a dollar,” he wrote.
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6 Comments
“Well, Frack Me !”
Bummer! :-D
Ray Morris
Just wonder if there is any money set aside for proper well closure and clean up. If not, we tax payers may have another mess on our hands similar to Whittaker Bermite (with VOCs from oil instead of perchlorate)and no one to pay for it except us. We should all be very concerned about this.
So after the bk, who cleans up and detoxes the old dead oil field?
The earth is polluted as it is raped to maximize profits until bankruptcy. Then citizens are left with the clean-up at their own expense. This is capitalism 101 with little or no regulations. But remember, we are a democracy. If we don’t like it, we have the power to change it! If someone acted like this in our own house, we would have asked them to take a hike long ago. The good news is…
Bernie looks like he’ll do just that with social progress!