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3 Burning Questions LINN Energy Investors Want Answered This Week

Photo Credit: LINN Energy

It would be an understatement to say that this has been a tough year for investors of LINN Energy (NASDAQOTH: LINEQ  ) . 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 (UNKNOWN: LNCO.DL  ) to purchase Berry Petroleum (UNKNOWN: BRY.DL2  ) 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. 

What investors really want to know is how safe LINN's dividend will be in the future. That's because dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. While LINN has been a great compounding machine so far, the short attacks highlight the risks of owning just one high-yielding stock, which is why it's important to balance out the risk of owning a company like LINN with other rock-solid dividend stocks. That's why I'd like to offer you a list of the absolute best of the best when it comes to rock-solid dividend stocks. To discover the identities of these companies before the rest of the market catches on, you can access this valuable free report by simply clicking here now.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 06, 2013, at 10:24 PM, ajstudebaker2 wrote:

    I believe that Linn should explain the impact on distributable cash flow of ceasing to buy puts.

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Related Tickers

9/26/2016 3:56 PM
LINEQ $0.05 Down +0.00 -1.80%
Linn Energy, LLC CAPS Rating: **
BRY.DL2 $0.00 Down +0.00 +0.00%
Berry Petroleum Co… CAPS Rating: ***
LNCO.DL $0.05 Down +0.00 -3.88%
Linn Co, LLC CAPS Rating: ***