I think it is safe to say that given the current market, units are likely flowing from PIPE holders to retail holders. Many of the private equity firms were forced to de-leverage. This is good, eventually the balance will be returned when enough shares have been absorbed. I would imagine some units are getting sucked up by private equity firms that stayed out of trouble, but overall, I would think that the bulk is getting taken up by small investors. Linn is a good company. They have good assets, but they will have a tough time living up the same distribution growth rate that they had over the past 2 years. That being said, it has an attractive yield, good properties and a greatly reduced downside due to hedging. I would be pleased if they can grow the distribution by 5% a year. The problem they have is that the faster you grow the distribution, the quicker you lower your R/P life, which causes you to drill more wells to bring probable to proven....the faster you run, the harder it is to run faster...
Your observation about maintaining production actually gets at part of the issue, but there is more to the analysis.
First, reserves of LINE are only proved, not proved plus probable. SEC doesn't let companies use probable reserves. CANROYs use probable but that is because there is an exception for Canadian reporting, which allows including probable in reserve numbers.
Second, the issue with all oil and gas producers is that maintaining production, even flat, is no mean feat due to decline rates. Lots of drilling is therefore required even to keep production flat.
LINE actually increased its reserves based on drilling activity in 2007. That often happens because formerly "probable reserves" -- and therefore unreported reserves -- become proved reserves which are reportable due to drilling activity.
Decline rates also have another reserve life impact that is imprecisely understood. A well with reserves of 1 BCF producing 50 MMCF/ yr we would say has a reserve life of 20 years. In fact, because of declining production rates, the well life is longer than 20 years. For examplem if production declines at 10% a year, the second year's production would be 45 MMBL. After 2 years of production (50 + 45) reserves are now 905 MMCF and production was 45 MMCF, so we would say that this single well's reserve life (which is reserves divided by the last year's production) is now 20.11 years -- it went up because the rate of production dropped even though total reserves dropped. Of course, declining production, assuming prices are steady, means less revenue in year 2.
The math is funky, but that is part of the mystery of understanding oil and gas.
Yes, that is why it is important for them to buy low decline rate production. Some of the properties that they acquired in the Lamamco deal are very old, low production wells. At some point, the wells reach a terminal decline rate (i.e. they have bottomed out and the only thing that really keeps them from pumping is economics and reservoir pressure.) Even mighty companies like Exxon are having a tough time growing production by anything more than say 1% a year.