Linn Energy Granite Wash Drilling Smaller

Photo Credit: LINN Energy

It would be an understatement to say that this has been a tough year for investors of LINN Energy (NASDAQ:LINE). Short-sellers have relentlessly attacked the company's business practices which sent its units down nearly 25% on the year. To make matters worse, all this extra attention has drawn in the SEC, which is now taking a closer look at the company's practices. The other concern is that this puts the company's complex deal with affiliate LinnCo (NASDAQ:LNCO) to purchase Berry Petroleum (UNKNOWN:BRY.DL) in jeopardy.

That's why investors should keep their eyes peeled on Aug. 8 for the company's second-quarter earnings release. The hope is that along with the release the company will have some answers to the questions that investors really want to know. Let's take a look at the three questions investors really need to see addressed.

What's the update on the SEC?
It has been a little over a month since the company voluntarily disclosed that the SEC commenced an informal inquiry. While it's highly unlikely that the company will announce that the SEC has completed its inquiry, what investors will want to see is if there is any indication of a timetable for it to be wrapped up. Any information that the company can provide to investors on the situation will help to alleviate fears that something really is amiss.

When will the Berry deal close?
One way the company might hint that everything is in the clear is to announce a new date for investors to vote on its proposed Berry transaction. On the other hand, if LINN were to indefinitely delay or even cancel the deal it could signal that its issues with the SEC run much deeper than first thought.

I'll go out on a limb here and say that it's doubtful that LINN will call off the deal when it reports. Berry is scheduled to report the day before LINN, and it isn't holding a conference call with analysts. That suggests to me that there are no major changes in the works, otherwise the company would have scheduled a conference call to answer questions about its next steps.

What changes to LINN's business model can investors expect?
One area where LINN might be able to provide some valuable insight is in any announced changes to its strategy. The company has already said that it has stopped buying puts to hedge its production because of the confusion it has caused for investors. Any further announced changes to its hedging policy or capital plans could indicate the SEC has been suggesting changes to how LINN operates.

Final Foolish thoughts
There is no question that this is a critical report for LINN Energy. Analysts and investors will be paying more attention to what LINN has to say regarding these three questions rather than the actual earnings and production numbers it delivers. That's why investors should stay tuned to later this week for an in-depth analysis of LINN's report as we try and make sense of what effect, if any, short-sellers will have on LINN's business. 

Fool contributor Matt DiLallo owns shares of LINN Energy, LLC and LinnCo, LLC and has the following options: short October 2013 $25 puts on LINN Energy, LLC and short November 2013 $25 puts on LinnCo, LLC. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.