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Linn Energy, LLC (LINE) Message Board

  • ronharv ronharv Apr 2, 2013 9:23 AM Flag

    MSN Money Article Part II

    Management announced an immediate flow through to unitholders in a 6.2% distribution increase. That's expected to be effective with the (August) payment, assuming timely completion of the merger in the first half of 2013.
    There's no question hedge accounting adds a layer of complexity for analyzing Linn that's not shared by other energy producer MLPs. And some analysts have looked at Linn's wells and found them to be on balance smaller and less predictable as well.
    The Berry merger's scale and the nature of the added assets should answer at least some of the concerns on the second count, as it adds what are generally low-decline wells. That point was made by Moody's, which changed Linn's outlook to "developing" from "negative" following the merger announcement.
    As for the hedge accounting, Linn's has been the subject of scrutiny in previous years, but never with anything that stuck. And though wide North American energy-price differentials -- coupled with soft economic growth -- are what amounts to a stress test for all accounting models this year, Linn's appears to be holding up.
    Of course, regardless of how much it hedges and how well it does so, Linn is at its core an energy producer. Although it appears to have locked in prices for planned output through 2017, earnings are ultimately affected by commodity prices.
    That's a risk all investors who buy the units should keep in mind. But so long as Linn Energy trades under $40 and continues to perform, it's a "strong buy" and a top pick for new money. The stock is a solid value yielding upward of 7% with considerable upside for the rest of 2013.

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