LINN Energy Expects a Great Fourth-Quarter

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Things are going so well at LINN Energy (NASDAQOTH: LINEQ  ) that it just couldn't wait until the new year to share its progress this quarter. That's why the company put out a press release just to let investors know that it is having a terrific fourth-quarter. That's not all LINN had to say, so let's take a closer look.

Steady production
LINN Energy expects its fourth-quarter production to be right on target and land somewhere between 840-860 million cubic feet equivalent per day, cfe/d. However, what's important here is that the company expects to hit these numbers despite being affected by the severe winter weather that hit the Permian Basin and Mid-Continent this quarter. Investors might remember that LINN's production and earnings were actually negatively affected by the weather during this year's first quarter.

Not all companies operating in the region were able to get by without lowering production guidance. Pioneer Natural Resources (NYSE: PXD  ) , for example, issued a press release of its own noting that the same severe weather had a negative impact on its production and drilling. Because of this, Pioneer expects that it will need to issue new lowered guidance once it knows the extent of the damage. The reason LINN's production wasn't affected to the same degree as Pioneer's is that it made up for the production shortfall by exceeding expectations in its drilling program.

Better cash flow
While reiterating its production guidance is nice, the real news is that LINN expects its cash flow to be 5%-10% above its distribution. That's a lot better than the previous expectation, which had LINN paying out every dime it made to investors. Basically, this means that LINN's distribution coverage ratio will be up to 1.10 times on the quarter instead of 1.0 times. It's also well above the worrisome first quarter showing of 0.88 times that started its year off on the wrong foot.

Two factors have contributed to the excess cash flow this quarter. LINN is seeing better realized prices for its natural gas liquids, while its operating expenses are falling. The one-two punch of higher prices and lower costs is the perfect recipe for higher profits and exceptionally strong distribution coverage.

Merger update
LINN's great fourth-quarter could be even better, as it expects to close its merger with Berry Petroleum (UNKNOWN: BRY.DL2  ) before the end of the year. The LinnCo (UNKNOWN: LNCO.DL  ) -led deal isn't factored into the quarter's guidance, so it's quite possible LINN exceeds these raised expectations before all is said and done.

The deal heads for a final investor vote on Dec. 16, and is expected to close immediately after that vote. Once the deal closes, the combined entity will emerge as a stronger company, as the Berry deal improves LINN's exposure to liquids, debt metrics, and reserves.

Investor takeaway
LINN Energy's year started off on the wrong foot after its poor first quarter showing. However, the company battled back and is poised to end the year on a good note. With the Berry merger nearing completion, 2014 looks exceptionally bright for LINN Energy.

Nine more great dividend stocks
Dividend stocks like LINN Energy can make you rich. It's as simple as that. Over the long term, the compounding effect of the payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

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 December 04, 2013, at 12:46 PM, lrark wrote:

    Take that, Barrons!

  • Report this Comment On December 04, 2013, at 4:39 PM, revrurik wrote:

    "LINN Energy's year started off on the wrong foot after its poor first quarter showing." Yeah, that and the hatchet-job from Barrons and their delusional writers. Yeesh....!

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2751700, ~/Articles/ArticleHandler.aspx, 10/1/2016 1:30:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
BRY.DL2 $0.00 Down +0.00 +0.00%
Berry Petroleum Co… CAPS Rating: ***
LINEQ $0.06 Up +0.00 +0.36%
Linn Energy, LLC CAPS Rating: **
LNCO.DL $0.05 Down +0.00 -3.88%
Linn Co, LLC CAPS Rating: ***
PXD $185.65 Up +0.29 +0.16%
Pioneer Natural Re… CAPS Rating: **