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LINN Energy Takes a New Approach to Combat its Greatest Foe

By Matthew DiLallo – Jul 16, 2014 at 10:00AM

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LINN Energy’s latest portfolio reshuffle shows the company is taking a new approach in its battle against its greatest foe. It’s a foe that both Devon Energy and Apache are better prepared to handle than LINN Energy.

Photo credit: Apache. 

LINN Energy (LINEQ) seems to have finally realized that the weapons in its current arsenal simply couldn't combat its biggest foe. And while most investors probably think I'm talking about short-sellers or the financial media, this foe is actually the company's struggles to overcome its decline rate. This is what has given fuel to the fire set by those negative on LINN Energy, without which they wouldn't have much to back up their arguments.

LINN Energy's decline rate probably isn't something most investors even know exists, though the company has mentioned it in nearly every acquisition it has made over the past few years. Now we are seeing the company put greater focus on reducing the overall decline rate of its portfolio by reshaping that portfolio. This is why the company recently decided to exit its position in the Granite Wash and Cleveland plays and replace that production with Devon Energy's (DVN -0.28%) low-decline natural-gas assets.

The following slideshow is intended to help investors better grasp the overall picture of the problem with decline rates. It details Devon Energy's decline rates in the Permian Basin, as well as what Apache (APA 0.62%) experiences in the Granite Wash and Cleveland plays. Those are compared to the type of decline rates LINN Energy wants in its portfolio. 

Matt DiLallo owns shares of Linn Energy, LLC. The Motley Fool owns shares of Devon Energy. 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.

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