Citing their hedging strategy, UBS (NYSE:UBS) raised their price target on LINN Energy (Nasdaq:LINE) while maintaining their "Buy" rating on them.
"Signaling confidence in LINE’s operations and balance sheet strength as well as its ability to capitalize on growth initiatives, mgmt lifted the 3Q distribution -5%, to $0.66, its first increase since 1Q08. In addition, mgmt added to hedge positions and now estimates that -100% of planned natgas production is hedged through 2015, while planned oil production is hedged -100% through 2013 and 70% in 2014-15. We applaud the move to secure price protection and note oil hedges were added well above our forecasts. We also highlight LINE’s extensive use of put contracts," UBS said.
LINN closed Friday at $34.99, gaining $0.56, or 1.63 percent. They raised their price target from $36 to $38.
Concerning EPU for 2010, they cut that from $1.53 to $1.47.
Showing posts with label Hedging. Show all posts
Showing posts with label Hedging. Show all posts
Monday, November 1, 2010
Thursday, August 5, 2010
Frontier Oil (NYSE:FTO) Misses Earnings, Meets Revenue Estimates
Even though they missed earnings estimates for the quarter, Frontier Oil (NYSE:FTO) had a decent quarter, with earnings reaching net income reaching $66.1 million, or 63 cents a share, up from the $57.9 million loss, or 56 cents a share, last year.
Frontier missed after excluding times, with adjusted earnings of 46 cents, whereas analysts had been looking for 47 cents a share.
Revenue in the quarter was $1.55 billion, an increase of 40 percent over the same quarter last year, which was exactly what analysts had expected for the quarter.
A hedging gain was a major factor in the performance of the company over last year, with a hedging gain of 17 cents a share against last year's 18-cent a share loss on hedges.
Like most energy companies in the last quarter, margins have been the story behind their increase in earnings, especially with refinery margins, which CEO Mike Jennings said should continue to widen incrementally going forward.
The differential in light/heavy crude also more than doubled during the quarter, increasing to an average of $9.33 a barrel, helping the margins of the company.
Frontier missed after excluding times, with adjusted earnings of 46 cents, whereas analysts had been looking for 47 cents a share.
Revenue in the quarter was $1.55 billion, an increase of 40 percent over the same quarter last year, which was exactly what analysts had expected for the quarter.
A hedging gain was a major factor in the performance of the company over last year, with a hedging gain of 17 cents a share against last year's 18-cent a share loss on hedges.
Like most energy companies in the last quarter, margins have been the story behind their increase in earnings, especially with refinery margins, which CEO Mike Jennings said should continue to widen incrementally going forward.
The differential in light/heavy crude also more than doubled during the quarter, increasing to an average of $9.33 a barrel, helping the margins of the company.
Wednesday, February 4, 2009
Ethanol: Archer Daniels Midland Company
Even though Archer Danels Midland Company (ADM) reported extraordinary profits for the economic climate they're operating in, those very profits caused consternation among many industry watchers, and even resulted in JP Morgan downgrading them from their suspicions.
Ethanol has been a huge downward pull on the company, as low gas prices and demand make it a disastrous sector to be operating in; and there's no quick way to get out of it. That's what happens when huge companies like Archer Daniels Midland Company suck from the government teat and then get sour milk. This is going to be the story of ethanol and companies trying to exploit taxpayer financed loopholes that give them tax credits that prop up and create an otherwise non-existent market.
Clueless Archer Daniels Midland Co CEO Patricia Woertz said during a conference call that the company didn't foresee "the depth of this current economic crisis or the decline in gasoline demand.” Strange, even a general bystander saw that the economic pressure would cause consumers to stop driving and traveling as much. That comment doesn't make much sense.
As far as the drag that ethanol had on Archer Daniel Midland Company profits, losses from ethanol, and to a smaller degree from other bioproducts came to a huge $111 million just for the three months ending in December.
Also during the call, the third-largest U.S. ethanol producer, Archer Daniels Midland Co., siad that the ethanol business is "challenging." Duh! Ethanol isn't just challenging, it's ignorant and needs to be dropped as a taxpayer subsidized socialist project it is.
What this shows is that any something happens in the economy to slow it down, ethanol will hit companies hard, along with its workers and investors, and cause everyone pain. All that because the government has blocked oil companies from drilling the hundreds of billions of barrels of proven oil reserves under U.S. land or coastlines.
We need to forget the misguided and criminal renewable fuels standard and forget this waste of time and billions of dollars on pursuing a pipe dream just so the government and its sycophants can say they're doing something about the alleged energy crisis that only exists because of government regulations creating it.
So far ethanol production capacity has plunged by 21 percent, that much being shut down in the U.S. as the numbers don't make sense. Ethanol capacity has fallen from 12.9 billion to 10.2 billion.
The response of Archer Daniels Midland Company to the disaster? They're going to make more ethanol facilities, as they're close to finishing two more ethanol plants in Cedar Rapids, Iowa and Columbus, Nebraska. What a waste of investors' money.
According to Archer Daniels Midland Company Chief Executive Patricia Woertz, profits for the company came for the most part from their agricultural services division, surging by $143 million for the quarter.
Even so, most of those profits came from successful hedging that locked in crop prices, giving them a big edge over their competitors who didn't fare nearly as well. The problem of course is there was some luck involved with those successful commodity futures hedges, and it isn't something that is reproducible going forward.
One successful element that can be reproduced for the ethanol company is the huge fee increases it charged for shipping grains overseas. That is the only bright spot for the immediate future that gives credence to the otherwise dubious profit gains of 24 percent, which was very suspect considering the rest of Archer Daniels Midland Company competitors did so poorly.
Analysts were not so kind with Archer Daniels Midland Company Chief Executive Patricia Woertz when she refused to identify where the profits specifically came from, with some even saying investors should be wary when they aren't allowed to look under the hood to see what makes it work.
That's another way of saying that there was a lot of luck involved, as when asked a number of times, Woertz refused to let it be known what made the company so profitable in such terrible conditions.
Again, if it was something reproducible, it would have been quickly identified by Woertz, as it would have been a competitive advantage which would have caused Archer Daniels Midland Company stock to surge ahead of its competitors.
So while ethanol pulled down ADM stocks, what evidently looks like a lucky timing of some hedging gave the company some good numbers. That unrepeatable situation has the ADM Corporation looking good, even though ADM stock quotes are not looking as good as you would expect in these circumstances.
ADM will probably be under more pressure from the tremendous numbers just because they revealed an unusual circumstance that obviously wasn't related to operational skill and productivity. That means that the guidance given that profits will be under pressure going foward for Archer Daniels Midland will be accurate, and the downward pressure of embracing the failing ethanol industry, as well as fairly long term economic slowdown will start to affect the grain company like any other.
This profit performance was an anamoly, and Archer Daniels Midland Company and Patricia Woertz know it. This is why any ADM news going forward won't be in line with what just happened with the company. It makes you think it would have been better to have underperformed so the obvious anamoly wouldn't have been so obvious and glaring.
Now the ADM stock will be under further pressure, assuming they won't be able to repeat the lucky hedging, or increase shipping fees at the rate they have been. Put that together with ethanol pummeling the company profits, and there isn't really any good news for ADM in the near or mid future.
Ethanol has been a huge downward pull on the company, as low gas prices and demand make it a disastrous sector to be operating in; and there's no quick way to get out of it. That's what happens when huge companies like Archer Daniels Midland Company suck from the government teat and then get sour milk. This is going to be the story of ethanol and companies trying to exploit taxpayer financed loopholes that give them tax credits that prop up and create an otherwise non-existent market.
Clueless Archer Daniels Midland Co CEO Patricia Woertz said during a conference call that the company didn't foresee "the depth of this current economic crisis or the decline in gasoline demand.” Strange, even a general bystander saw that the economic pressure would cause consumers to stop driving and traveling as much. That comment doesn't make much sense.
As far as the drag that ethanol had on Archer Daniel Midland Company profits, losses from ethanol, and to a smaller degree from other bioproducts came to a huge $111 million just for the three months ending in December.
Also during the call, the third-largest U.S. ethanol producer, Archer Daniels Midland Co., siad that the ethanol business is "challenging." Duh! Ethanol isn't just challenging, it's ignorant and needs to be dropped as a taxpayer subsidized socialist project it is.
What this shows is that any something happens in the economy to slow it down, ethanol will hit companies hard, along with its workers and investors, and cause everyone pain. All that because the government has blocked oil companies from drilling the hundreds of billions of barrels of proven oil reserves under U.S. land or coastlines.
We need to forget the misguided and criminal renewable fuels standard and forget this waste of time and billions of dollars on pursuing a pipe dream just so the government and its sycophants can say they're doing something about the alleged energy crisis that only exists because of government regulations creating it.
So far ethanol production capacity has plunged by 21 percent, that much being shut down in the U.S. as the numbers don't make sense. Ethanol capacity has fallen from 12.9 billion to 10.2 billion.
The response of Archer Daniels Midland Company to the disaster? They're going to make more ethanol facilities, as they're close to finishing two more ethanol plants in Cedar Rapids, Iowa and Columbus, Nebraska. What a waste of investors' money.
According to Archer Daniels Midland Company Chief Executive Patricia Woertz, profits for the company came for the most part from their agricultural services division, surging by $143 million for the quarter.
Even so, most of those profits came from successful hedging that locked in crop prices, giving them a big edge over their competitors who didn't fare nearly as well. The problem of course is there was some luck involved with those successful commodity futures hedges, and it isn't something that is reproducible going forward.
One successful element that can be reproduced for the ethanol company is the huge fee increases it charged for shipping grains overseas. That is the only bright spot for the immediate future that gives credence to the otherwise dubious profit gains of 24 percent, which was very suspect considering the rest of Archer Daniels Midland Company competitors did so poorly.
Analysts were not so kind with Archer Daniels Midland Company Chief Executive Patricia Woertz when she refused to identify where the profits specifically came from, with some even saying investors should be wary when they aren't allowed to look under the hood to see what makes it work.
That's another way of saying that there was a lot of luck involved, as when asked a number of times, Woertz refused to let it be known what made the company so profitable in such terrible conditions.
Again, if it was something reproducible, it would have been quickly identified by Woertz, as it would have been a competitive advantage which would have caused Archer Daniels Midland Company stock to surge ahead of its competitors.
So while ethanol pulled down ADM stocks, what evidently looks like a lucky timing of some hedging gave the company some good numbers. That unrepeatable situation has the ADM Corporation looking good, even though ADM stock quotes are not looking as good as you would expect in these circumstances.
ADM will probably be under more pressure from the tremendous numbers just because they revealed an unusual circumstance that obviously wasn't related to operational skill and productivity. That means that the guidance given that profits will be under pressure going foward for Archer Daniels Midland will be accurate, and the downward pressure of embracing the failing ethanol industry, as well as fairly long term economic slowdown will start to affect the grain company like any other.
This profit performance was an anamoly, and Archer Daniels Midland Company and Patricia Woertz know it. This is why any ADM news going forward won't be in line with what just happened with the company. It makes you think it would have been better to have underperformed so the obvious anamoly wouldn't have been so obvious and glaring.
Now the ADM stock will be under further pressure, assuming they won't be able to repeat the lucky hedging, or increase shipping fees at the rate they have been. Put that together with ethanol pummeling the company profits, and there isn't really any good news for ADM in the near or mid future.
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