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MLP's are the next group to feel the pain LINN started the bloodletting.

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Thats crazy being that MLP's generally are low risk and shallow decline with a modest CAPEX program. If they are in a bind after cutting distributions, the independents with active drilling programs are hemorrhaging.

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I've said this before, but the upstream MLP is a crappy model. They won't hardly drill, so the vast majority of their growth comes from acquisitions. If they're not out-acquiring their depletion their NAV is declining in a flat price environment. They need to hedge production to protect their cash flow, but no one wants to hedge in the backwardated market we were stuck in for so long before this "bust" started. The upstream MLP model works well when you can buy production at a PV20 on the strip. If your numbers are right and there's not a lot of backwardation, you can hedge production as you buy it, pay an 8% dividend and grow at 12%. It's been years since you could do that with any kind of volume and growth companies aren't developing projects to sell to MLPs (drilling all PUDs). They're drilling just enough to PUD up the acreage then selling it to larger growth companies who will continue to drill.

Linn and Breitburn have accepted that they can't continue their current model so they've taken over $1B each in the past few months from equity and bond offerings so they can run small growth companies on the side to develop acreage and sell PDP assets into the MLP. To me, they've told themsleves "Our business model doesn't work, so let's take the business model that's working for everyone else, do that on the side and see if it can feed our other model that's not working."

"Independents with active drilling programs" is a pretty broad brush since there are a lot of variables within that category. I'm an independent with an active drilling program and we're doing okay. Our rates of return aren't what they were at $100 oil, but they're still positive and I'm more optimistic now (versus $100 oil days) that our development costs are down 28% and continue to fall. The guys that maxed out credit facilities at $100 pricing are taking a haircut on cash flow and are having to pay down their revolvers since their collateral value is being cut. They're also not able to participate in development at cheaper prices.

The way to succeed in this cyclical business is be conservative when prices are good. Pay down debt, sell off marginal assets, and accumulate cash. Debt is a noose when it's getting called and your income is going down. Those marginal assets are now liabilities and cash is king. The time to borrow money is when prices are down and your collateral has a much stronger chance of appreciating in value rather than depreciating.

Everyone who is either out of work or short handed at work; don't let the stress of the job or finding one get to you too bad. We found out yesterday that one of our VPs passed away in his sleep Sunday night. He was in his mid-fifties and was healthy from all indications. Obviously, it's still a little unclear what caused the sudden tragedy, but you have to think that the stress on the job played into it at least a little. Our group has downsized by nearly 50% over the last year and his role was getting more challenging by the day as we were still expected to do more with less. These can be tough times but we can't forget to take care of ourselves and our families at home!

He likely got a severance package of sorts. You can't get personally involved like that.