Please ensure Javascript is enabled for purposes of website accessibility

3 Numbers to Watch When LINN Energy LLC Reports Earnings

By Matthew DiLallo - Feb 26, 2014 at 9:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

LINN Energy LLC and LinnCo LLC are expected to deliver fourth-quarter and full-year results on Feb. 27.

Photo credit: LINN Energy LLC

LINN Energy LLC (LINEQ) as well as its affiliate LinnCo LLC (NASDAQ: LNCO) are expected to deliver fourth-quarter and full-year results on Thursday before the market opens. LINN already told investors that we can expect a great quarter. However, if something changed from that update it's because one of the following three numbers didn't live up to expectations.

Production
LINN Energy expects its fourth-quarter production to be in a range of 840-860 MMcfe/d. That would put the company right on track to hit its 2013 organic production growth target of 8%-10% on the year. As investors we'd prefer to see the company at least hit the high end of that target range, if not exceed it.

LINN Energy likely would have easily exceeded its production target if it wasn't for severe winter weather in the Permian Basin and Mid-Continent regions on the quarter. The good news is that while many of its peers already reported weaker than expected production because of issues with the weather, LINN Energy doesn't see the weather impacting its production. So, this will still be a nice reversal for LINN Energy and LinnCo after what happened earlier in the year when poor weather was one of the many issues that caused a poor start to the year.

Photo credit: LINN Energy LLC

Berry Petroleum's contribution
One of the highlights on the quarter will likely be the closing of LinnCo's complex deal with LINN Energy for Berry Petroleum. Because the deal didn't close until the end of the quarter it likely didn't impact LINN's quarterly results by all that much. That said, investors will still want to take a look at what LINN Energy had to say about Berry Petroleum's results on the quarter.

The one number to keep an eye on is production, which should have totaled 44,000 Boe/d. Berry is coming off of a very solid third quarter where it delivered solid oil-rich production growth. We should expect to see nothing less again this quarter. This is why investors will want to key in to what LINN Energy has to say about Berry's results on the quarter.

Excess cash flow
One of LINN Energy's biggest problems to start the year is that it was paying out more to its investors than it was earning. That number reversed last quarter and should be even better this quarter. After reporting income above its distribution of about 1% last quarter, the company expects to produce 5%-10% more cash than it distributes to investors this quarter. Further, it expects its excess cash flow to continue improving now that it has completed the merger with Berry Petroleum.

Because of this it is possible that the company will be in the position to raise its distribution to investors. As some will remember, that was the plan when the company announced it was acquiring Berry last February.

Investor takeaway
Because LINN Energy and by extension LinnCo already announced that we can expect a great quarter, I wouldn't expect that we will see any real surprises in Thursday's report. If anything, we could expect to see the company meet or exceed the high end of its own guidance range and maybe even announce an increase in its distribution. That would be a welcomed sight for investors that endured a pretty rough 2013.

Looking for more rock-solid income stocks like LINN Energy and LinnCo?


Matt DiLallo owns shares of Linn Co, LLC and Linn Energy, LLC. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Linn Energy, LLC Stock Quote
Linn Energy, LLC
LINEQ

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.