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Call is TODAY (Tuesday, June 18th) at 11am EST.

LINN Energy Not Top 10 - SLIDES

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  • Conference Code: 112928#


LINN Energy (LINE, LNCO) is a ~$13B enterprise value upstream MLP with 4.8 Tcfe of proved reserves and 800 Mcfe/d of production from multiple US onshore basins.  By enterprise value, it is the largest upstream MLP in the US.

Since its IPO in 2006, it has been a self-proclaimed “acquisition machine,” completing more than $9B worth of deals. In February 2013, LINN announced its largest acquisition yet - a $4.3B all-stock (LNCO) merger with C-Corp E&P Berry Petroleum (BRY).  This deal is still pending, and LINN/BRY expect it to close in 3Q13.

All along the way LINN has rewarded its investors with a steady, growing distribution payment; and as the distribution grew, so did the unit price.  LINN investors have done well, and for years the Company’s business model and accounting practices went unchallenged.  LINN is revered in the oil and gas community; in fact Oil & Gas Investor recently named its Chairman, President, and CEO Mark Ellis as its 2012 “Executive of the Year.”

But scrutiny has arrived.  Our research suggests that it’s been distribution growth at all costs, and that the distribution is funded largely with cash from capital raises, not operations.  As evidence, LINN’s non-GAAP measure of “distributable cash flow” looks nothing like GAAP net income or free cash flow.  Say ‘net income doesn’t matter’ at your own risk… 

We urge LINE and LNCO investors to scrutinize as we have.  We urge the Berry Petroleum board, management team, family, and shareholders to take a good, hard look at the security, LNCO, that they are trading their 100+ year old company for.  In our view, LNCO is worth a small fraction of what it’s trading at today, and BRY shareholders are receiving grossly overvalued “paper” for their valuable assets.  In short, we think that this is a bad deal for BRY shareholders.

In our view, LINN is the best short in the oil & gas space today.  In this presentation we will show you why…

Kevin Kaiser

Senior Analyst