On Oct 16, 2013, Zacks Investment Research upgraded independent oil and gas operator Linn Energy, LLC (LINE) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The company delivered earnings surprises in three out of the last four quarters with an average beat of 17.65%. The long-term expected earnings growth of Linn Energy is set at an encouraging 2.00%.
The acquisition of oil and natural gas properties in the Permian Basin in Sep 2013 will offer increased reserve opportunities for Linn Energy in the future. It is a strategic move on the part of Linn Energy as the Permian play has an estimated resource potential of more than one billion barrels of oil and has a production life-span of over 100 years.
The company will witness reserve growth from the current shale explosion in the U.S. In addition, Linn Energy’s proposed merger with the Berry Petroleum Company (BRY) is expected to boost the company’s reserve portfolio.
Linn Energy’s effective hedging program will cushion its margins from volatility in commodity prices. Furthermore, Linn Energy’s strong cash flow growth of 358.5% to $561.3 million in the first half of 2013 from $122.4 million in the first half of 2012 will allow the company to maintain its healthy dividend yield of 11%, which is significantly higher than the industry average of 1.56%.
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