3 Reasons to Sell LINN Energyhttp://www.fool.com/investing/general/2013/10/11/3-reasons-to-sell-linn-energy.aspx Matthew DiLallo
October 11, 2013
Investing in energy is fraught with risk. Whether it's commodity price volatility, political posturing, or operational missteps, a lot can and does go wrong when investing in oil and gas production. LINN Energy (NASDAQ: LINE) was formed as a different kind of oil and natural gas company. Instead of risking investor capital on exploration, LINN has focused instead on buying mature producing assets and operating them for maximum cash flow. It locks in that cash flow by hedging all of its production several years in advance.
In doing so, LINN Energy has mitigated both exploration risk and commodity price volatility and has become an income-producing machine. However, it has also drawn the attention of those who think this is a company not worth owning and should be shorted instead. With all of the noise, is LINN Energy even worth owning? Let's take a look at three reasons why investors might want to consider jettisoning LINN from their portfolio.
Reason to sell No. 1: Headache reliever
Reason to sell No. 2: Informal SEC inquiry
Investors have had to endure several months of relative silence from LINN on the matter. The company has filed amendment No. 4 to its Registration Statement on Form S-4 in regards to the LinnCo/Berry merger. Further, the record date for the respective unitholder and shareholder meeting has come and gone with no further updates. While both it and Berry remain committed to the deal, it's still anyone's guess if that deal will ever close. Each passing day of no resolution to the situation is enough for some investors to grow tired of the situation and decide that it's not worth owning LINN.
Reason to sell No. 3: Operational missteps
One of the roots of its problems is that several of its Texas Hogshooter wells underperformed expectations in the first quarter. Not only did this impact its returns but it forced the company to shift its focus. LINN simply hasn't been able to drill its way out of its problems.
This is in contrast to BreitBurn Energy Partners (NASDAQ: BB