Upstream exploration and production Master Limited Partnership LINN Energy (LINEQ), along with its financial holding entity LinnCo (NASDAQ: LNCO), reported solid progress in its key strategic priorities last year. The key highlights of its 2013 earnings report include organic production growth and closing the much-awaited merger with Berry Petroleum. Nevertheless, units of LINN declined sharply after releasing earnings, presumably because the market didn't get the production growth it wanted.

As happens so frequently, it seems Wall Street isn't giving credit to LINN's long-term potential, preferring instead to panic about short-term production disappointment. LINN still has plenty of growth left in the pipeline, and more than enough cash flow to cover its near double-digit distribution.

How LINN's key segments are performing
LINN operates a number of divisions that it breaks out separately when reporting results. In all, LINN grew average daily production by 23% in 2013, and by 21% excluding the contributions from the Berry merger. Proved reserves jumped 34%. In the fourth quarter, LINN's production hit the midpoint of its previously issued guidance, even with the negative impacts from the severe weather experienced during the quarter. Here are the key figures across LINN's business.

First and foremost is LINN's Permian Basin operation. The company grew average production to approximately 18,000 barrels of oil equivalent per day, which represented 32% growth year over year. Berry added about 1,000 barrels per day to production. Success at the Permian Basin was heavily due to LINN's vertical drilling program at the Wolfberry field. This is one of three crucial drilling programs that LINN plans to run in the Permian Basin in 2014. In total, these three projects will involve six rigs.

LINN's next important geography is California. Here is where Berry's assets will heavily contribute to LINN in the years ahead. LINN's average production reached 6,000 barrels per day in the fourth quarter, 4,000 barrels of which were due to the Berry assets. With Berry, LINN's combined production should soon hit 25,000 barrels per day, which would make it the fifth-largest producer in California.

Where LINN will spend in 2014
Not surprisingly, a sizable portion of LINN's 2014 capital budget will be devoted to its two most critical regions, the Permian Basin and California. LINN expects to allocate a total of $1.6 billion to capital spending this year, which involves both its existing projects and Berry's assets as well.

LINN will spend about 25% of its 2014 budget in the Permian Basin and another 17% in California. The remainder will be allocated toward the company's remaining Jonah Field, Uinta, Granite Walsh, and Hugoton Field plays. In the first quarter of 2014, LINN expects average production to reach 1,085 millions of cubic feet equivalents per day, which would represent 22% growth over the fourth quarter 2013 total.

What to do with Midland Basin?
Now that the Berry acquisition has finally closed, investors have a clearer understanding of LINN's new asset portfolio and its key operating objectives in the year ahead. However, one lingering issue still remains in the form of LINN's Midland Basin portion of its Permian position. This is an asset that LINN would greatly like to monetize to maximize value, and it has a few available options.

Over the next several months, LINN will consider an asset trade, an outright sale of the position, or pursuing an active drilling program there. The position consists of 55,000 net acres, and the Midland Basin accounts for nearly two-thirds of LINN's total Permian position. As a result, it's clear this is a significant issue.

It seems LINN would like to trade or sell the asset, which it believes will be immediately accretive to cash flow. Failing that, however, the company is fully prepared to commence active drilling, since it has already performed a thorough evaluation of the field's potential. Should a trade or sale fall through, LINN would expect results from its wells as early as the second quarter.

LINN Energy: Plenty of growth left
LINN Energy closed on its aggressive acquisitions last year and made measurable progress in its key geographic regions. Production and proved reserves are going in the right direction, and a new opportunity to create value exists in its Midland Basin operations. Wall Street may have been disappointed with LINN's results, but its double-digit yield and steady growth are reasons enough for long-term investors to have confidence in the company's future.

LINN's yield is attractive, but compare it to these 9 dividend payers