Linn Energy Llc Linnco Llc

Source: LINN Energy.

Many Americans will head to the polls Tuesday morning to vote in the midterm elections. However, that likely won't be the first thing on the agenda for the management team at LINN Energy (NASDAQ:LINE), which will report its third-quarter results and host a conference call with analysts and investors. This will be a key report for investors, so here's what to keep an eye on when those numbers hit the wire.

1. Look at the numbers that matter
Don't bother looking at LINN's revenue or earnings per share, as neither number really matters. Instead, we want to see if LINN Energy met -- or better yet, exceeded -- its guidance for production and distributable cash flow for the third quarter. We want to see production of 1,210-1,260 MMcfe/d and distributable cash flow of about $304 million.

LINN Energy expects excess cash flow of $63 million after paying distributions to investors. That suggests a very healthy coverage ratio of 1.26 times. One reason cash flow will be strong is that the company bought Devon Energy's (NYSE:DVN) natural gas assets late in the second quarter, but didn't unload its assets in the Granite Wash (which were used to pay for the Devon Energy deal) until after the third quarter ended. Investors should realize that the strength the company's management team guided for in the third quarter might not continue.

2. How much did falling oil prices impact results
LINN Energy's unit price has been crushed in recent months due to worries over its exposure to falling oil prices, as shown in the following chart.

LINE Chart

LINE data by YCharts.

Look for any indication that falling oil prices impacted LINN Energy's cash flow. The company has pointed out in investor presentations that 100% of 2014 cash flow is secured thanks to its strong hedge position. Furthermore, 93% of 2015 cash flow and 88% of 2016 cash flow are also protected. The question is whether this proved to be the case in the third quarter, or if the company missed guidance due to the oil price plunge. We also want to see what impact oil prices will have on the company going forward. For example, did LINN Energy add to its hedge position as oil prices fell in order to eliminate the 7% cash flow uncertainty in 2015, or does it now see weakness in 2015 due to some exposure to oil prices? 

3. Any impact to the final Midland Basin sale
LINN Energy this year has completed two trades and one sale from its position in the Midland Basin. However, the company still has 6,600 net acres, along with production of 8,000 barrels of oil equivalent per day, that it plans to sell or trade as it exits the Midland. We want to see if LINN Energy is now having trouble unloading this asset as oil prices plummet.

In announcing the third part of its Midland Basin exit last month, the company said it still saw strong interest in the market to sell or trade these assets. Ideally, we'd like to see the company announce that it has consummated a deal in order to eliminate any remaining uncertainty. However, the big sell-off in oil prices and higher costs associated with horizontal drilling in the Midland Basin might force LINN Energy to hold its remaining acreage a little longer than planned.

Expect LINN Energy to announce strong third-quarter results on Tuesday. However, keep in mind that the sell-off in oil prices could impact the company's operations in future quarters. So we want to see what steps the company plans to take while oil prices are weak in order to keep its distribution flowing, and, hopefully soon, growing.

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