LINN Energy Finally Completed the Berry Merger, Now What?

It only took 11 months, but LINN Energy (NASDAQ: LINE  ) was finally able to put a ring on Berry Petroleum and complete the near-$5 billion acquisition through its operating arm LinnCo (NASDAQ: LNCO  ) . For much of the year, investors and casual observers in the company have been fixated on this deal -- Will the SEC put the kibosh on it? Is Linn spending too much for Berry? -- but now that it's finally complete, investors need to look at what's next for this master limited partnership.

We can debate LINNs hedging program and spending habits until we are blue in the face, but the success of this company ultimately boils down to its ability to efficiently squeeze every last drop of oil from its mature, long-life assets. In several ways, the Berry buyout could actually help drive operational efficiencies in some of LINN's big holdings. To find out more about what the new LINN Energy looks like to investors, tune into the video below.

Let's face it:  We like LINN for that 10% distribution
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  • Report this Comment On December 23, 2013, at 10:17 AM, JustMee01 wrote:

    While I agree with the statement that Linn won't change its MO, its ability to hedge at current 100% levels has been compromised. It won't be able to hedge to 100% several years out anymore, unless it resumes its controversial put strategy.

    Linn's revolver covenants do not allow it to hedge to 100% of capacity with swaps. That's actually why the company started using puts in the first place. With a swap, If production ever came in low, Linn would still need to deliver. Banks won't let them accept that risk, putting an 80% cap on the swap hedgebook, if memory serves.

    To return to a 100% strategy, they'll have to resume buying puts in the out years. It could happen, but it would probably revive some of the short chatter about hedgebook accouting. That would be an obvious negative right now, so I'd expect their hedging strategies to remain less aggressive until this controversy is completely behind them.

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