ONE UGLY DAY
I guess the first logical place for the MLP index to go would be to test that "v" bottom at 275 but if the overall market selloff keeps going that 262 low is not impossible.
The dow chart is hideous and that "w" bottom in 2006 is probably the next logical level of support. That means a trip to 10,700 is not impossible and 10,200 is the next level of support beyond that.
Crude meanwhile closed just above the top of this channel which technically is a breakout but i guess we'll know by tomorrow's action whether we head for points north of 140.
I don't know about you guys but frankly after today my hair hurts and my teeth itch!
joseph cioffi's Source Page - Associated Content
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Comment from CITIBANK about LINE:
Below is an excerpt from Citi's E&P Industry Report dated June 24, 2008.
No substitute for your own personal due diligence. However, wanted to share with those that may not have seen it.
We rate Linn Energy with a 1S (Buy, Speculative Risk) and a 12-month target price of $32.50 per unit. Our investment opinion reflects our view that these units offer investors a relatively attractive yield with the potential for cash distribution growth through the addition of production and reserves. Looking ahead, our expectation is that distribution growth will be driven mainly by acquisitions of oil and gas properties. Through an aggressive acquisition strategy, Linn Energy has grown from an enterprise value of roughly $720 million at the IPO to over $4.0 billion currently. After a fair amount of success in making acquisitions and increasing distributions to unit holders, the company's units have been adversely impacted by an overall market malaise and by the E&P MLP sector being out of favor. Furthermore, we believe the trading of Linn units have reflected concerns over integration delays and significant overhang issues.
Although overall market concerns should continue to impact the units in the near term, the company specific concerns that have led to underperformance over the past few months have begun to subside, in our view. Longer term, we believe the investment proposition remains favorable (given the partnership's risk management program, strong underlying fundamentals, relatively attractive long term acquisition economics and discount to Net Asset Value). As such, we urge investors with a longer term investment horizon, able to sustain some volatility, to look beyond the current dislocation in the markets and strategically add to/build positions.
Valuation
We derive our $32.50 per unit 12-month target price for Linn using a trailing enterprise value to EBITDA (EV/EBITDA) multiple analysis. We have focused on a market-based multiple approach as our primary valuation metric to better estimate the value the market is willing to pay for E&P MLPs in the current environment. Our current target price assumes applying a 9.0x EV/EBITDA multiple to our adjusted EBITDA forecast of $603.6 million (i.e. on a four quarter rolling basis; over the next twelve months). Our target multiple is at a premium to the average target multiple used to value the other E&P MLPs in our coverage universe. More specifically, it reflects our view that Linn Energy should be valued as a “growth through acquisition story," has added flexibility to pursue acquisitions/create value, is the most liquid name in the sector and is considered by most to be the bellwether of the sector.
Carlos
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