Linn Energy LLC Earnings: What to Expect Thursday

Linn Energy (NASDAQ: LINE  ) will release its quarterly report on Thursday, and investors have been pleased about the progress the stock has made in recovering from its worst levels of late 2013. But even as Linn Energy LLC investors and shareholders of the related LinnCo (NASDAQ: LNCO  ) start to see the effects of the now-completed acquisition of Berry Petroleum, the newly combined entity will still have to compete against peers Vanguard Natural Resources (NASDAQ: VNR  ) and BreitBurn Energy Partners (NASDAQ: BBEP  ) and their own acquisition efforts.

Despite its unusual corporate structure for an upstream business, Linn Energy has the same goal as any other oil and gas company: getting the most it can from the assets at its disposal. With its takeover of Berry in the record books, Linn has the ability to become even more efficient in what has been a long string of asset acquisitions in the past. At the same time, many investors choose Linn because it pays much higher dividends than most traditional oil and gas producers. Let's take an early look at what's been happening with Linn Energy over the past quarter and what we're likely to see in its report.


Source: Linn Energy.

Stats on Linn Energy

Analyst EPS Estimate

$0.26

Change From Year-Ago EPS

(37%)

Revenue Estimate

$625.36 million

Change From Year-Ago Revenue

9.5%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

Which way will Linn Energy earnings move this quarter?
In recent months, analysts have had mixed views on Linn Energy earnings, raising fourth-quarter estimates by a penny per share but cutting full-year 2014 projections by the same penny. The unit price has jumped 15% since mid-November.

The big news of the quarter came in December, when Linn Energy announced that it had completed its merger with Berry Petroleum. Many had feared that the long-awaited deal would never get done, while others pointed to raised bids along the way as representing too high a price to pay for Berry. But the acquisition helped Linn in its efforts to increase its exposure to oil and liquids, making its overall mix more oil-rich than gas-rich and thereby transforming the way that the company reports its business.

As a result of the merger, Linn will grow in key areas including California, the Permian Basin, and the Uinta Basin. Moreover, with the equity financing of the deal, Linn didn't have to stretch its balance sheet by incurring additional debt to facilitate the merger. With long reserve lives for the assets it acquired, Linn Energy will see a dramatic production increase that should last for years to come.

But Linn isn't the only company that's been incorporating recent acquisitions. BreitBurn bought valuable assets in Oklahoma from Whiting Petroleum last year, stretching its balance sheet but giving it exposure to a potentially lucrative area that hasn't gotten as much attention as some other high-profile plays. For its part, Vanguard said in late December that it would buy $581 million in natural-gas assets in Wyoming, taking advantage of rock-bottom gas prices to pick up what it hopes will be lucrative long-term holdings when natural gas recovers.

Still, Linn has strong growth potential. Horizontal drilling in the Permian Basin could be a big driver of increased production in the well-established play in the years ahead, with some early success creating a lot of potential if those results prove representative of its broader assets. Moreover, other underdeveloped assets could pay off in better-than-expected ways, creating even more profit potential.

In the Linn Energy earnings report, watch to see how the company positions itself to move forward now that it has had a few months with Berry's assets under its roof. Investors will watch closely to make sure that Linn is capturing every bit of profit potential from both its new assets and its legacy holdings from before the merger.

Can you do better than Linn?
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Click here to add Linn Energy to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (3) | 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 February 26, 2014, at 3:17 PM, gabby1945 wrote:

    Your estimates for Linn reporting are old. The current estimate is for $.29/share. The estimates have been rising for the past month. A few days ago it was $.28/share. The reason I bring this up is if Linn reports $.29/share it will be inline with estimates, not beating by $.05. That will make a difference in share movement.

    As with all companies reporting this period it will be the forward guidance that determines the share direction, after hours and the following day. The rhetoric from the company supports your optimism, at least that's how I read their statements. If they fail to make the numbers or forecast less than expected yearly results, you may have a buying opportunity if you are not fully allocated.

    Other than that slight discrepancy in earnings, your comparisons were well done.

  • Report this Comment On February 27, 2014, at 2:26 PM, uptickusa wrote:

    Linn has 60000 acres in Texas Permian basin plus 675 drilling sites the can opt to drill -joint venture or trade/sell.

    the drilling factor of horizontal vs vertical drilling needs to be considered however the poential for profit has not been factored in going forward-potential of billions in profit upon decision...

  • Report this Comment On March 02, 2014, at 10:36 AM, gabby1945 wrote:

    There is speculation that Linn will divest some assets, meaning sell. I find this amusing. The fact is nothing was stated in the "call" about selling anything. They may form a partnership, trade assets, or sell something but until the details have been worked out no one but insiders know what is on the agenda. Therefore, this speculation is just a guess and should be weighted as that, a guess for future action.

    The current management team is shareholder friendly and has in the past done what it considered best for the company, which directly affects its shareholders. That being said, I think speculation should be done after the announcement has been made, whatever the facts stated are.

    There is also speculations that the distributions will not be raised anytime soon. So what? ETP held their distributions the same for years while absorbing business units they purchased. The share price did basically a small trading range during that period. Now completed for the most part, the shares trade $10-$15 higher than the past with possible distributions increases in the future. They positioned the company for growth. isn't that a positive for the health of the company and its unit holders?

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