LINN Energy Announces Results for Second Quarter 2009
- Press Release
- Source: LINN Energy, LLC
- On 7:05 am EDT, Thursday August 6, 2009
HOUSTON, Aug. 6, 2009 (GLOBE NEWSWIRE) -- LINN Energy, LLC (Nasdaq:LINE - News) announced today financial and operating results for the three months and six months ended June 30, 2009, and its outlook for the remainder of the year. The Company highlights the following significant achievements:
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| LINE | 25.61 | +0.11 |
* Average production at the high end of the Company's guidance range of 219 million cubic feet of natural gas equivalent per day (MMcfe/d), compared to mid-point guidance of 215 MMcfe/d; * Continued improvement of lease operating expenses to $1.67 per thousand cubic feet of natural gas equivalent (Mcfe), compared to mid-point guidance of $1.74 per Mcfe; * Adjusted EBITDA of $143 million, compared to mid-point guidance of $138 million; * Distribution coverage ratio of 1.21x, compared to mid-point guidance of 1.11x; * Adjusted net income per unit of $0.45 for second quarter 2009 (a non-GAAP financial measure - see Schedule 1); * Completion of a $250 million senior notes offering and a $103 million public equity offering, which provided additional financial flexibility for potential acquisition opportunities and an enhanced borrowing capacity, including available cash, of approximately $590 million at quarter end; * Announcement of two asset acquisitions in the Permian Basin for a combined contract price of $118 million; and * Repositioned hedge portfolio with increased weighted average prices in 2010 and 2011.
"LINN Energy continued to deliver outstanding results in the second quarter of this year," said Michael C. Linn, Chairman and Chief Executive Officer. "The Company improved its financial strength through our renegotiated credit facility, bond and equity offerings and repositioned hedge book. Additionally, we recently announced two asset acquisitions in the Permian Basin, and we are excited about the potential to grow this into a core area for the Company. With the steps we have taken thus far, we believe that the Company is poised to continue to deliver positive results and to grow through additional acquisition opportunities."
Second Quarter 2009 Results (From Continuing Operations)
During the second quarter 2009, LINN Energy generated adjusted EBITDA (a non-GAAP financial measure) of $143 million. The Company's distribution coverage ratio was 1.21x for the quarter, compared to mid-point guidance of 1.11x. Adjusted EBITDA is the primary measure used by Company management to evaluate cash flow and the Company's ability to sustain or increase distributions. A reconciliation of adjusted EBITDA to net income is provided in this release (see Schedule 2). The most significant reconciling items between net income and adjusted EBITDA are interest expense and non-cash items, including the change in fair value of derivatives and depreciation, depletion and amortization.
Average production was 219 MMcfe/d for the second quarter 2009, compared to 217 MMcfe/d for the first quarter 2009. Oil, natural gas and natural gas liquids revenues for the second quarter 2009 were approximately $92 million and realized gains from hedge revenues were $111 million. For the first quarter 2009, oil, natural gas and natural gas liquids revenues were approximately $80 million and realized gains from hedge revenues were $124 million. Lease operating expenses for the second quarter 2009 were approximately $33 million, or $1.67 per Mcfe, which is down from $34 million, or $1.73 per Mcfe, in the first quarter 2009. Transportation expenses during the second quarter 2009 also decreased to approximately $2.5 million, or $0.13 per Mcfe, from $3.0 million, or $0.15 per Mcfe, for the first quarter 2009. Production and ad valorem taxes for the second quarter 2009 were approximately $7.9 million, or $0.40 per Mcfe, compared to $7.6 million, or $0.39 per Mcfe, in the first quarter 2009.
The Company utilizes commodity hedging to capture cash flow margin and reduce cash flow volatility. Due to the recent increase in commodity prices during the second quarter 2009, the Company reported a $233 million loss on natural gas and oil hedges, including $344 million of non-cash change in fair value of hedge positions. Non-cash gains or losses do not affect adjusted EBITDA, cash flow from operations or the Company's ability to pay its cash distributions.
For the second quarter 2009, the Company reported a net loss of approximately $269 million, or $(2.31) per unit, which includes a non-cash loss of $344 million, or $(2.95) per unit, from the change in fair value of hedges covering future production, and a non-cash gain of $23 million, or $0.19 per unit, on interest rate hedges. Excluding these items, adjusted net income for the second quarter 2009 was $53 million, or $0.45 per unit.
Adjusted net income from continuing operations is a non-GAAP financial measure, and a reconciliation of adjusted net income from continuing operations to net income from continuing operations is provided in this release (see Schedule 1). Adjusted net income is presented because the excluded items affect the comparability of operating results from period to period.
Operational Update
The Company operated a total of two drilling rigs and drilled 19 wells in the second quarter 2009. In comparison, the Company operated three drilling rigs and drilled 41 wells in the first quarter 2009. In response to low natural gas prices, the Company shut-in approximately 5 MMcfe/d of Mid-Continent production and began deferring new Granite Wash completions during the second quarter. By year-end, the Company estimates it will have an additional 10 MMcfe/d of initial production potential from these deferred completions. The Company anticipates continued reduced drilling activities during the balance of the year and will continue to focus on low-cost, high-return optimization projects.
Bond and Equity Offerings
During the second quarter, the Company completed a $250 million bond offering of 11.75% senior unsecured notes, due 2017. In addition, the Company completed a $103 million public equity offering, issuing an aggregate of 6.3 million units (5.5 million units offered plus underwriters' purchase of 825,000 units). Net proceeds from these offerings were used to reduce indebtedness under the Company's credit facility.
Hedge Information
In July 2009, the Company capitalized on the value of its hedges in the years 2012 through 2014 to raise the hedge prices on existing natural gas and oil hedges in 2010 and 2011, enhancing downside protection on existing hedged volumes. At current production levels, the Company is approximately 100 percent hedged for 2009, 2010 and 2011. For 2009, the Company is hedged at weighted average prices of $102.21 per barrel and $8.32 per thousand cubic feet of natural gas (Mcf). For 2010, the Company is hedged at a weighted average oil price of $99.68 per barrel and raised its natural gas price to $8.66 per Mcf. For 2011, the Company raised its weighted average hedged oil price to $82.50 per barrel and its natural gas price to $9.25 per Mcf. In addition, the Company is hedged on substantially all of its exposure to the Mid-Continent natural gas basis differential. The Company has also hedged its interest rate risk with LIBOR swaps at a rate of 3.85 percent through 2013. For more detailed information regarding the Company's hedge positions, please see Schedule 10 of this press release.
Credit Facility
On April 28, 2009, the Company entered into an amended and restated $1.75 billion senior secured credit facility with an initial borrowing base of $1.75 billion. The credit facility covenants were substantially unchanged with this amendment and restatement, and the maturity was extended from August 2010 to August 2012. After adjustment for the Company's recent bond offering, the borrowing base was approximately $1.69 billion at quarter end. As a result of the Company's hedge repositioning, the Company anticipates the borrowing base under its credit facility will be reduced to approximately $1.65 billion. The Company anticipates the borrowing base under its credit facility will be increased in October 2009 due to its pending acquisitions in the Permian Basin.
Permian Basin Acquisitions
On August 6, 2009, the Company announced that it had entered into two definitive purchase agreements to acquire certain oil and natural gas properties located in the Permian Basin in West Texas and New Mexico for a combined contract price of $118 million, subject to closing conditions and purchase price adjustments. The Company anticipates that both acquisitions will close before October 1, 2009, and will be financed with borrowings under LINN Energy's existing credit facility. These properties are expected to have proved reserves of more than 12 million barrels of oil equivalent, which are approximately 86 percent oil and more than 58 percent proved developed. These assets are currently producing approximately 1,350 barrels of oil equivalent per day, resulting in a reserve life index of more than 24 years. The combined acquisitions offer approximately 180 proved infill development and low-risk optimization projects that the Company anticipates will create future growth opportunities. The acquisitions have not been incorporated into guidance included with this press release.
Cash Distributions
On July 23, 2009, the Company's Board of Directors declared a quarterly cash distribution of $0.63 per unit, or $2.52 per unit on an annualized basis, with respect to the second quarter 2009. The distribution will be paid on August 14, 2009, to unitholders of record as of close of business on August 7, 2009.
Use of Non-GAAP Measures
Adjusted EBITDA from continuing operations, adjusted net income from continuing operations and combined revenues are non-GAAP financial measures that are reconciled to their most comparable GAAP financial measures in Schedules 1, 2 and 3 in this press release.
Conference Call
As previously announced, management will host a teleconference call on August 6, 2009, at 10 a.m. Central (11 a.m. Eastern), to discuss the Company's second quarter 2009 results and its outlook for the remainder of the year. Prepared remarks will be followed by a question and answer period.
Investors and analysts are invited to participate in the call by phone at (800) 599-9829 (Passcode: 30646303) or via the internet at www.linnenergy.com. A replay of the call will be available on the Company's website or by phone at (888) 286-8010 (Passcode: 88220379) for a seven-day period following the call.
ABOUT LINN ENERGY
LINN Energy's mission is to acquire, develop and maximize cash flow from a growing portfolio of long-life natural gas and oil assets. LINN Energy is an independent natural gas and oil development company, with approximately 1.7 Tcfe of proved reserves in producing U.S. basins as of year-end 2008. More information about LINN Energy is available at www.linnenergy.com.
This press release includes "forward-looking statements." All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements include but are not limited to forward-looking statements about acquisitions and the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, hedging activities, capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to the Company's financial performance and results, availability of sufficient cash flow to pay distributions and execute its business plan, prices and demand for oil, natural gas and natural gas liquids, the ability to replace reserves and efficiently develop current reserves and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the Securities and Exchange Commission. See "Risk Factors" in the Company's Annual Report filed on Form 10-K and other public filings and press releases.
Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.
The financial summary follows; all amounts within are unaudited.
Effective January 1, 2009, the Company adopted FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" ("FSP EITF 03-6-1"), which requires that the Company's unvested restricted units be included in the computation of earnings per unit under the two-class method. FSP EITF 03-6-1 requires retrospective adjustment of all prior period earnings per unit data. As such, earnings per unit data included in the following has been adjusted for all prior periods presented.
Schedule 1
LINN Energy, LLC
Explanation and Reconciliation of Adjusted Net Income
Adjusted Net Income from Continuing Operations
Adjusted net income from continuing operations is a non-GAAP
performance measure used by Company management to evaluate its
operational performance from oil and gas properties, prior to
derivative gains and losses, impairment of goodwill and long-lived
assets and (gain) loss on sale of assets, net. The following presents
a reconciliation of income (loss) from continuing operations to
adjusted net income from continuing operations:
Three Months Ended Six Months Ended
------------------------------- --------------------
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
(in thousands, except per unit amounts)
Income (loss)
from
continuing
operations $(268,701) $ 121,287 $(725,381) $(147,414) $(984,340)
Plus:
Unrealized
(gain)
loss on
commodity
derivatives 343,919 (37,246) 773,397 306,673 1,037,382
Unrealized
(gain) loss
on interest
rate
derivatives (22,535) 1,457 (35,825) (21,078) 2,127
Realized (gain)
loss on
canceled
derivatives 60 (4,257) 68,197 (4,197) 68,197
(Gain) loss
on sale of
assets, net 60 (25,711) -- (25,651) --
--------- --------- --------- --------- ---------
Adjusted net
income from
continuing
operations $ 52,803 $ 55,530 $ 80,388 $ 108,333 $ 123,366
========= ========= ========= ========= =========
Income (loss)
from
continuing
operations
per unit
- basic $ (2.31) $ 1.06 $ (6.35) $ (1.28) $ (8.63)
Plus, per
unit:
Unrealized
(gain) loss
on
commodity
derivatives 2.95 (0.33) 6.76 2.66 9.09
Unrealized
(gain) loss
on interest
rate
derivatives (0.19) 0.01 (0.31) (0.18) 0.02
Realized
(gain) loss
on canceled
derivatives -- (0.04) 0.60 (0.04) 0.60
(Gain) loss
on sale of
assets, net -- (0.22) -- (0.22) --
--------- --------- --------- --------- ---------
Adjusted net
income from
continuing
operations
per unit
- basic $ 0.45 $ 0.48 $ 0.70 $ 0.94 $ 1.08
========= ========= ========= ========= =========
Schedule 2
LINN Energy, LLC
Explanation and Reconciliation of Adjusted EBITDA
Adjusted EBITDA
This press release includes the non-generally accepted accounting principle ("non-GAAP") financial measure of adjusted EBITDA. The accompanying schedules provide reconciliations of this non-GAAP financial measure to its most directly comparable financial measure calculated and presented in accordance with United States generally accepted accounting principles ("GAAP"). This non-GAAP financial measure should not be considered as an alternative to GAAP measures, such as net income, operating income or any other GAAP measure of liquidity or financial performance.
The Company defines adjusted EBITDA as income (loss) from continuing operations plus the following adjustments:
-- Net operating cash flow from acquisitions and divestitures,
effective date through closing date;
-- Interest expense;
-- Depreciation, depletion and amortization;
-- Impairment of goodwill and long-lived assets;
-- Write-off of deferred financing fees and other;
-- (Gain) loss on sale of assets, net;
-- Unrealized (gain) loss on commodity derivatives;
-- Unrealized (gain) loss on interest rate derivatives;
-- Realized (gain) loss on interest rate derivatives;
-- Realized (gain) loss on canceled derivatives;
-- Unit-based compensation expenses;
-- Exploration costs; and
-- Income tax (benefit) expense.
Adjusted EBITDA is a significant non-GAAP performance metric used by Company management to indicate (prior to the establishment of any reserves by its Board of Directors) the cash distributions the Company expects to pay unitholders. Specifically, this financial measure indicates to investors whether or not the Company is generating cash flow at a level that can sustain or support an increase in its quarterly distribution rates. Adjusted EBITDA is also a quantitative metric used throughout the investment community with respect to publicly-traded partnerships and limited liability companies.
Schedule 2 - Continued
LINN Energy, LLC
Explanation and Reconciliation of Adjusted EBITDA
The following presents a reconciliation of income (loss) from
continuing operations to adjusted EBITDA:
Three Months Ended Six Months Ended
------------------------------- --------------------
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
(in thousands)
Income (loss)
from
continuing
operations $(268,701) $ 121,287 $(725,381) $(147,414) $(984,340)
Plus:
Net oper-
ating cash
flow from
acquisi-
tions and
divesti-
tures,
effective
date
through
closing
date (1) -- -- 343 -- 8,664
Interest
expense,
cash 8,402 20,610 24,054 29,012 47,408
Interest
expense,
noncash 14,860 (6,201) (722) 8,659 1,217
Depreciation,
depletion
and
amortiza-
tion 50,390 52,104 50,885 102,494 95,255
Write-off
of deferred
financing
fees and
other 204 -- 3,377 204 3,377
(Gain) loss
on sale of
assets, net 60 (25,711) -- (25,651) --
Unrealized
(gain)
loss on
commodity
derivatives 343,919 (37,246) 773,397 306,673 1,037,382
Unrealized
(gain)
loss on
interest
rate
derivatives (22,535) 1,457 (35,825) (21,078) 2,127
Realized
loss on
interest
rate deri-
vatives (2) 10,557 10,114 4,221 20,671 5,662
Realized
(gain)
loss on
canceled
derivatives 60 (4,257) 68,197 (4,197) 68,197
Unit-based
compensa-
tion
expenses 3,651 4,303 3,874 7,954 7,485
Exploration
costs 2,199 1,565 61 3,764 2,681
Income tax
(benefit)
expense 185 136 (164) 321 45
--------- --------- --------- --------- ---------
Adjusted
EBITDA from
continuing
operations
$ 143,251 $ 138,161 $ 166,317 $ 281,412 $ 295,160
========= ========= ========= ========= =========
(1) Includes net operating cash flow from acquisitions and
divestitures through the date of this report.
(2) During the first quarter of 2009, the Company revised its
definition of adjusted EBITDA to include realized (gains) losses
on interest rate derivatives in order to match the related
interest expense. All prior periods amounts have been
reclassified to conform to current period presentation. This
reclassification had no effect on the Company's reported net
income.
Schedule 3
LINN Energy, LLC
Explanation and Reconciliation of Combined Revenues
Combined Revenues
Combined revenues is a non-GAAP performance measure used by Company
management to evaluate its performance. Management believes that the
presentation of combined revenues provides useful information to
investors because it is used by investors and securities analysts in
evaluating oil and gas companies. This non-GAAP financial measure
should not be considered as an alternative to GAAP measures, such as
total revenues. The following presents a reconciliation of revenues
and other from continuing operations to combined revenues from
continuing operations:
Three Months Ended Six Months Ended
----------------------------------- -----------------------
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
----------- ----------- ----------- ----------- -----------
(in thousands)
Revenues
and
other
from
contin-
uing
opera-
tions $ (139,045) $ 242,661 $ (610,983) $ 103,616 $ (700,610)
Less:
Unreal-
ized
(gain)
loss on
oil and
gas
deriva-
tives 343,919 (37,246) 773,397 306,673 1,037,382
Gas
market-
ing
reve-
nues (1,183) (516) (3,593) (1,699) (6,409)
Other
reve-
nues (641) (966) (642) (1,607) (1,121)
----------- ----------- ----------- ----------- -----------
Combined
revenues
from
contin-
uing
oper-
ations $ 203,050 $ 203,933 $ 158,179 $ 406,983 $ 329,242
=========== =========== =========== =========== ===========
Gain
(loss)
on oil
and gas
deriva-
tives $ (232,775)$ 161,315 $ (870,804)$ (71,460)$(1,139,598)
Less:
Unrea-
lized
(gain)
loss on
oil and
gas
deriva-
tives 343,919 (37,246) 773,397 306,673 1,037,382
----------- ----------- ----------- ----------- -----------
Hedge
revenues
(losses) $ 111,144 $ 124,069 $ (97,407)$ 235,213 $ (102,216)
=========== =========== =========== =========== ===========
Schedule 4
LINN Energy, LLC
Condensed Consolidated Statements of Operations
Three Months Ended Six Months Ended
------------------------------- --------------------
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
(in thousands, except per unit amounts)
Revenues and
other:
Oil, gas and
natural gas
liquid
sales $ 91,906 $ 79,864 $ 255,586 $ 171,770 $ 431,458
Gain (loss)
on oil and
gas
derivatives (232,775) 161,315 (870,804) (71,460) (1,139,598)
Gas marketing
revenues 1,183 516 3,593 1,699 6,409
Other
revenues 641 966 642 1,607 1,121
--------- --------- --------- --------- ---------
(139,045) 242,661 (610,983) 103,616 (700,610)
--------- --------- --------- --------- ---------
Expenses:
Lease
operating
expenses 33,137 33,732 25,161 66,869 44,651
Transporta-
tion
expenses 2,516 2,967 3,663 5,483 6,991
Gas marketing
expenses 880 340 3,103 1,220 5,520
General and
administra-
tive
expenses 20,291 23,301 18,020 43,592 37,096
Exploration
costs 2,199 1,565 61 3,764 2,681
Depreciation,
depletion
and amor-
tization 50,390 52,104 50,885 102,494 95,255
Taxes, other
than income
taxes 7,882 7,567 17,628 15,449 30,601
(Gain) loss
on sale of
assets and
other, net (5) (26,711) -- (26,716) --
--------- --------- --------- --------- ---------
117,290 94,865 118,521 212,155 222,795
--------- --------- --------- --------- ---------
Other income
and
(expenses):
Interest
expense,
net of
amounts
capitalized (23,262) (14,409) (23,332) (37,671) (48,625)
Gain (loss)
on interest
rate swaps 11,918 (11,571) 31,604 347 (7,789)
Other, net (837) (393) (4,313) (1,230) (4,476)
--------- --------- --------- --------- ---------
(12,181) (26,373) 3,959 (38,554) (60,890)
--------- --------- --------- --------- ---------
Income (loss)
from
continuing
operations
before income
taxes (268,516) 121,423 (725,545) (147,093) (984,295)
Income tax
benefit
(expense) (185) (136) 164 (321) (45)
--------- --------- --------- --------- ---------
Income (loss)
from
continuing
operations (268,701) 121,287 (725,381) (147,414) (984,340)
Discontinued
operations:
Gain (loss)
on sale of
assets, net
of taxes 330 (1,048) (1,028) (718) (1,322)
Income (loss)
from
discontinued
operations,
net of
taxes (101) (838) 14,267 (939) 14,161
--------- --------- --------- --------- ---------
229 (1,886) 13,239 (1,657) 12,839
--------- --------- --------- --------- ---------
Net income
(loss) $(268,472) $ 119,401 $(712,142) $(149,071) $(971,501)
========= ========= ========= ========= =========
Income (loss)
per unit -
continuing
operations:
Units -
basic $ (2.31) $ 1.06 $ (6.35) $ (1.28) $ (8.63)
========= ========= ========= ========= =========
Units -
diluted $ (2.31) $ 1.06 $ (6.35) $ (1.28) $ (8.63)
========= ========= ========= ========= =========
Income (loss)
per unit -
discontinued
operations:
Units -
basic $ 0.01 $ (0.02) $ 0.12 $ (0.02) $ 0.11
========= ========= ========= ========= =========
Units -
diluted $ 0.01 $ (0.02) $ 0.12 $ (0.02) $ 0.11
========= ========= ========= ========= =========
Net income
(loss) per
unit:
Units -
basic $ (2.30) $ 1.04 $ (6.23) $ (1.30) $ (8.52)
========= ========= ========= ========= =========
Units -
diluted $ (2.30) $ 1.04 $ (6.23) $ (1.30) $ (8.52)
========= ========= ========= ========= =========
Weighted
average units
outstanding:
Units -
basic 116,497 113,473 114,252 114,993 114,005
========= ========= ========= ========= =========
Units -
diluted 116,497 113,502 114,252 114,993 114,005
========= ========= ========= ========= =========
Distributions
declared
per unit $ 0.63 $ 0.63 $ 0.63 $ 1.26 $ 1.26
========= ========= ========= ========= =========
Schedule 5
LINN Energy, LLC
Operating Statistics - Continuing Operations
Three Months Ended Six Months Ended
------------------------------ -------------------
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
-------- -------- -------- -------- --------
Average daily
production -
continuing
operations:
Gas (MMcf/d) 131 133 131 132 127
Oil (MBbls/d) 8.7 8.8 9.3 8.8 8.6
NGL (MBbls/d) 5.9 5.2 6.2 5.5 5.3
Total (MMcfe/d) 219 217 224 218 210
Weighted
average
prices
(hedged): (1)
Gas (Mcf) $ 8.17 $ 7.94 $ 9.92 $ 8.06 $ 9.10
Oil (Bbl) $ 113.68 $ 118.19 $ 81.11 $ 115.93 $ 78.37
NGL (Bbl) $ 28.49 $ 23.32 $ 70.55 $ 26.09 $ 68.60
Weighted
average
prices
(unhedged): (2)
Gas (Mcf) $ 2.88 $ 3.53 $ 9.96 $ 3.21 $ 8.85
Oil (Bbl) $ 53.10 $ 33.76 $ 114.99 $ 43.45 $ 103.88
NGL (Bbl) $ 28.49 $ 23.32 $ 70.55 $ 26.09 $ 68.60
Representative
NYMEX oil
and gas
prices:
Gas (MMBtu) $ 3.51 $ 4.91 $ 10.94 $ 4.21 $ 9.49
Oil (Bbl) $ 59.62 $ 43.08 $ 123.98 $ 51.35 $ 110.94
Costs per
Mcfe of
production:
Lease
operating
expenses $ 1.67 $ 1.73 $ 1.24 $ 1.70 $ 1.17
Transport-
ation
expenses $ 0.13 $ 0.15 $ 0.18 $ 0.14 $ 0.18
General and
admini-
strative
expenses (3) $ 1.02 $ 1.19 $ 0.89 $ 1.11 $ 0.97
Depreciation,
depletion
and
amort-
ization $ 2.53 $ 2.67 $ 2.50 $ 2.60 $ 2.50
Taxes, other
than income
taxes $ 0.40 $ 0.39 $ 0.87 $ 0.39 $ 0.80
(1) Includes the effect of realized gains (losses) on derivatives of
$111.1 million, $119.8 million and $(29.2) million (excluding
$68.2 million realized losses on canceled contracts) for the
three months ended June 30, 2009, March 31, 2009, and June 30,
2008, respectively. Includes the effect of realized gains
(losses) on derivatives of $231.0 million (excluding $4.3 million
realized gains on canceled contracts) and $(34.0) million
(excluding $68.2 million realized losses on canceled contracts)
for the six months ended June 30, 2009, and June 30, 2008,
respectively. The Company utilizes oil puts to hedge revenues
associated with its NGL production; therefore, all realized gains
(losses) on oil derivative contracts are included in weighted
average oil prices, rather than weighted average NGL prices.
(2) Does not include the effect of realized gains (losses) on
derivatives.
(3) General and administrative expenses for the three months ended
June 30, 2009, March 31, 2009, and June 30, 2008, include
approximately $3.6 million, $4.2 million and $3.8 million,
respectively, of noncash unit-based compensation expenses.
Excluding these amounts, general and administrative expenses for
the three months ended June 30, 2009, March 31, 2009, and June
30, 2008, were $0.84 per Mcfe, $0.98 per Mcfe and $0.70 per Mcfe,
respectively. General and administrative expenses for the six
months ended June 30, 2009, and June 30, 2008, includes
approximately $7.8 million and $7.4 million, respectively, of
noncash unit-based compensation expenses. Excluding these
amounts, general and administrative expenses for the six months
ended June 30, 2009, and June 30, 2008, were $0.91 for Mcfe and
$0.78 per Mcfe, respectively.
Schedule 6
LINN Energy, LLC
Selected Balance Sheet Data
June 30, December 31,
2009 2008
----------- -----------
(in thousands)
Assets
Total current assets $ 466,012 $ 563,931
Oil and gas properties, net 3,551,694 3,552,378
Other property and equipment, net 97,563 98,288
Other noncurrent assets, net 317,437 507,423
----------- -----------
Total assets $4,432,706 $4,722,020
=========== ===========
Liabilities and Unitholders' Capital
Total current liabilities $ 190,134 $ 237,830
Credit facility 1,118,000 1,403,393
Senior notes, net 488,167 250,175
Other noncurrent liabilities 66,218 69,936
----------- -----------
Total liabilities 1,862,519 1,961,334
Unitholders' capital 2,570,187 2,760,686
----------- -----------
Total liabilities and
unitholders' capital $4,432,706 $4,722,020
=========== ===========
Schedule 7
LINN Energy, LLC
Selected Cash Flow Data
Six Months Ended June 30,
---------------------------
2009 2008
----------- -----------
(in thousands)
Net cash provided by operating
activities $ 258,274 $ 60,583
Net cash used in investing
activities (103,410) (672,883)
Net cash provided by (used in)
financing activities (156,432) 620,471
----------- -----------
Net increase (decrease) in cash
and cash equivalents (1,568) 8,171
Cash and cash equivalents:
Beginning 28,668 1,441
----------- -----------
Ending $ 27,100 $ 9,612
=========== ===========
Schedule 8
LINN Energy, LLC
Guidance Table
Q3 2009E FY 2009E
--------------------- ---------------------
Net Production and
Other Revenues:
Gas (MMcf/d) 123 - 129 124 - 130
Oil (Bbls/d) 8,550 - 8,960 8,600 - 9,020
NGL (Bbls/d) 5,440 - 5,710 5,270 - 5,520
Total (MMcfe/d) 207 - 217 207 - 217
Other revenues, net (in
thousands) (1) $ 300 - $ 500 $ 2,500 - $ 3,500
Costs (in thousands):
Lease operating
expenses $ 32,000 - $ 34,000 $ 129,000 - $ 137,000
Transportation expenses 2,500 - 4,500 11,500 - 13,500
Taxes, other than
income taxes 8,000 - 10,000 31,000 - 35,000
--------- --------- --------- ---------
Total $ 42,500 - $ 48,500 $ 171,500 - $ 185,500
========= ========= ========= =========
General and
administrative
expenses - non-GAAP (2) $ 16,500 - $ 18,500 $ 68,000 - $ 72,000
Depreciation, depletion
and amortization $ 56,000 - $ 62,000 $ 215,000 - $ 230,000
Costs per Mcfe (Mid-
Point):
Lease operating
expenses $ 1.69 $ 1.72
Transportation expenses 0.18 0.16
Taxes, other than
income taxes 0.46 0.43
--------- ---------
Total $ 2.33 $ 2.31
========= =========
General and
administrative
expenses - non-GAAP (2) $ 0.90 $ 0.90
Depreciation, depletion
and amortization $ 3.03 $ 2.88
Targets (Mid-Point) (in
thousands):
Adjusted EBITDA (3) $ 135,750 $ 553,000
Interest expense (4) (5) (34,500) (122,000)
Maintenance capital
expenditures (24,250) (97,000)
--------- ---------
Distributable cash flow $ 77,000 $ 334,000
========= =========
Distributable cash flow
per unit (6) $ 0.63 $ 2.81
Distribution per unit
(6) (7) $ 0.63 $ 2.52
Distribution coverage
ratio (6) (7) 1.01x 1.11x
Weighted Average NYMEX
Differentials:
Gas (MMBtu) $ (0.80) - $ (0.60) $ (1.00) - $ (0.80)
Oil (Bbl) $ (7.00) - $ (4.50) $ (8.00) - $ (6.00)
NGL realization on
crude oil price 50% - 55% 50% - 55%
Unhedged Commodity Price
Assumptions: July August September Remainder
--------- --------- --------- ---------
Gas (MMBtu) $ 3.95 $ 3.38 $ 3.50 $ 3.50
Oil (Bbl) $ 64.29 $ 65.00 $ 65.00 $ 65.00
Notes to Guidance Table:
(1) Includes other revenues and margin on natural gas marketing
activities.
(2) Excludes unit-based compensation, which represents a noncash
charge based on equity-related compensation.
(3) Includes effects of the Company's hedge positions, cash flow
adjustments from acquisition and divestiture activities and other
expenses.
(4) Includes cash payments for interest expense as well as accrued
interest on the Company's outstanding senior notes.
(5) Includes the effects of the Company's interest rate swaps.
(6) Assumes 121.3 million units outstanding in Q3 2009 and 118.9
million units outstanding for full year 2009.
(7) Based on current quarterly distribution of $0.63 per unit, or
$2.52 per unit on an annualized basis.
Schedule 9
LINN Energy, LLC
Guidance Table - Commodity Hedge Summary
Q3 2009E FY 2009E
---------- ----------
Gas Positions:
Fixed Price Swaps:
Hedged Volume (MMMBtu) 9,896 39,586
Average Price ($/MMBtu) $ 8.53 $ 8.53
Puts:
Hedged Volume (MMMBtu) 1,740 6,960
Average Price ($/MMBtu) $ 7.50 $ 7.50
PEPL Puts: (1)
Hedged Volume (MMMBtu) 1,334 5,334
Average Price ($/MMBtu) $ 7.85 $ 7.85
Total:
Hedged Volume (MMMBtu) 12,970 51,880
Average Price ($/MMBtu) $ 8.32 $ 8.32
Oil Positions:
Fixed Price Swaps:
Hedged Volume (MBbls) 609 2,437
Average Price ($/Bbl) $ 90.00 $ 90.00
Puts: (2)
Hedged Volume (MBbls) 461 1,843
Average Price ($/Bbl) $ 120.00 $ 120.00
Collars:
Hedged Volume (MBbls) 62 250
Average Floor Price ($/Bbl) $ 90.00 $ 90.00
Average Ceiling Price ($/Bbl) $ 114.25 $ 114.25
Total:
Hedged Volume (MBbls) 1,132 4,530
Average Price ($/Bbl) $ 102.21 $ 102.21
Gas Basis Differential Positions:
PEPL Basis Swaps: (3)
Hedged Volume (MMMBtu) 11,729 46,916
Average Price ($/MMBtu) $ (0.97) $ (0.97)
Notes to Hedge Summary:
Includes positions covering production for all months within periods
specified.
(1) Settle on the PEPL spot price of gas to hedge basis differential
associated with gas production in the Mid-Continent Deep and
Mid-Continent Shallow regions.
(2) The Company uses oil puts to hedge oil production and NGL
revenues.
(3) Represents a swap of the basis between NYMEX and PEPL spot price
of gas for the volumes hedged.
Schedule 10
LINN Energy, LLC
Commodity Hedge Portfolio
The following table summarizes open positions as of July 31, 2009,
and represents, as of such date, derivatives in place through
December 31, 2013, on annual production volumes:
Year Year Year Year Year
2009 2010 2011 2012 2013
------- ------- ------- ------- -------
Gas Positions:
Fixed Price Swaps:
Hedged Volume (MMMBtu) 16,494 39,566 31,901 -- --
Average Price
($/MMBtu) $ 8.53 $ 8.90 $ 9.50 $ -- $ --
Puts:
Hedged Volume (MMMBtu) 2,900 6,960 6,960 -- --
Average Price
($/MMBtu) $ 7.50 $ 8.50 $ 9.50 $ -- $ --
PEPL Puts: (1)
Hedged Volume (MMMBtu) 2,223 10,634 13,259 -- --
Average Price
($/MMBtu) $ 7.85 $ 7.85 $ 8.50 $ -- $ --
Total:
Hedged Volume (MMMBtu) 21,617 57,160 52,120 -- --
Average Price
($/MMBtu) $ 8.32 $ 8.66 $ 9.25 $ -- $ --
Oil Positions:
Fixed Price Swaps:
Hedged Volume (MBbls) 1,015 2,150 2,073 -- --
Average Price ($/Bbl) $ 90.00 $ 90.00 $ 90.00 $ -- $ --
Puts: (2)
Hedged Volume (MBbls) 768 2,250 2,352 -- --
Average Price ($/Bbl) $120.00 $110.00 $ 75.00 $ -- $ --
Collars:
Hedged Volume (MBbls) 104 250 276 -- --
Average Floor Price
($/Bbl) $ 90.00 $ 90.00 $ 90.00 $ -- $ --
Average Ceiling Price
($/Bbl) $114.25 $112.00 $112.25 $ -- $ --
Total:
Hedged Volume (MBbls) 1,887 4,650 4,701 -- --
Average Price ($/Bbl) $102.21 $ 99.68 $ 82.50 $ -- $ --
Gas Basis Differential
Positions:
PEPL Basis Swaps: (3)
Hedged Volume (MMMBtu) 19,548 43,166 35,541 34,066 31,700
Hedged Differential
($/MMBtu) $ (0.97) $ (0.97) $ (0.96) $ (0.95) $ (1.01)
Notes to Hedge Portfolio:
(1) Settle on the PEPL spot price of gas to hedge basis differential
associated with gas production in the Mid-Continent Deep and
Mid-Continent Shallow regions.
(2) The Company utilizes oil puts to hedge revenues associated with
its NGL production.
(3) Represents a swap of the basis between NYMEX and PEPL spot price
of gas for the volumes hedged.
Contact:
LINN Energy, LLC
Investors:
Clay Jeansonne, Vice President - Investor Relations
281-840-4193
Media:
Paula Beasley, Manager, Public Affairs & Communications
281-840-4183
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