Skip to main content
Articles

Latest News and Analysis
Deals and Transactions
Track Drilling (Rigs by operator) | Completions (Frac Spreads)

Exploration & Production | Quarterly / Earnings Reports | Third Quarter (3Q) Update | Deals - Acquisition, Mergers, Divestitures | Forecast - Production

LINN Revists Recent Deals, Ups Daily Production in 3Q

printPrint    |   
LINN Revists Recent Deals, Ups Daily Production in 3Q

LINN Energy, LLC and LinnCo, LLC reported financial and operating results for the three months ended September 30, 2014, and the Company's outlook for the remainder of 2014.

Highlights:

  • Increased average daily production 51 percent to approximately 1,245 MMcfe/d for the third quarter 2014, compared to 823 MMcfe/d for the third quarter 2013;
  • Increased oil, natural gas and NGL sales 74 percent to approximately $937 million for the third quarter 2014, compared to $538 million for the third quarter 2013;
  • Distributions paid to unitholders of approximately $241 million, compared to $171 million for the third quarter 2013;
  • The Company fully covered its distribution and generated excess of net cash provided by operating activities after distributions to unitholders and discretionary adjustments of approximately $88 million for the third quarter 2014, compared to an excess of net cash of approximately $2 million for the third quarter 2013 (see Schedule 1, footnote 6); and
  • Net loss of approximately $4 million, or $0.02 per unit, for the third quarter 2014, which includes non-cash gains related to changes in fair value of unsettled commodity derivatives, including the reduction of put option premium value over time, of approximately $423 million, or $1.28 per unit, and an impairment charge of approximately $603 million, or $1.83 per unit, related to the divestiture of certain high valued unproved properties in the Midland Basin.

Mark E. Ellis, Chairman, President and Chief Executive Officer, commented: "Efficient management of our base assets continued to deliver positive results; in the third quarter we exceeded volume expectations and lowered operating costs. We are pleased to have closed several transformative transactions in the last few months that are consistent with our strategy of lowering capital intensity and overall decline rate."

Recent business development highlights include:

  • Closed first Exxon Mobil trade on August 15th;
  • Closed Devon assets acquisition on August 29th;
  • Closed Pioneer assets acquisition on September 11th;
  • Announced a second assets trade with Exxon Mobil on September 18th;
  • Announced the sale of assets in the Granite Wash and Cleveland plays to privately held institutional affiliates of EnerVest, Ltd. and FourPoint Energy, LLC on October 3rd;
  • Announced the sale of certain Wolfberry properties to Fleur de Lis Energy, LLC on October 3rd; and
  • All pending transactions are expected to close in the fourth quarter 2014.

3Q Operational Highlights

During the third quarter 2014, LINN's production of 1,245 MMcfe/d was comprised of approximately 48% natural gas, or 600 MMcf/d; 36% oil, or 74 MBbls/d; and 16% NGL, or 33.5 MBbls/d.

More detailed operational updates can be accessed below:

LINN's San Joaquin Ops Exceeding Expectations; Asset Swap Updated

LINN Talks Sale of Panhandle Assets; Growth in the Hugoton

Rockies

Third quarter 2014 production in the Rockies region averaged 333 MMcfe/d. After closing the Devon acquisition, this region became the Company's largest producing area. The Rockies region includes properties located in Wyoming (Green River, Washakie and Powder River Basins), Utah (Uinta Basin), North Dakota (Williston Basin) and Colorado (Piceance Basin). Integration of the newly acquired Devon assets remains on track.

In addition, LINN is currently building the Company's inventory of optimization projects and other capital opportunities for 2015.

Permian Basin

Third quarter 2014 production in the Permian Basin region averaged 154 MMcfe/d. Since May 2014, the Company has closed or announced the divestiture of approximately 90% of its Midland Basin acreage and over 50% of its production. LINN continues to see strong interest in a trade or sale of the remaining approximate 8.0 MBoe/d of production and 6,600 net acres, which are prospective for horizontal Wolfcamp drilling. LINN had budgeted approximately $280 million for development of the Midland Basin properties in 2014.

Financial Results

LINN increased production 51 percent to approximately 1,245 MMcfe/d for the third quarter 2014, compared to 823 MMcfe/d for the third quarter 2013. This increase in production is attributable to acquisitions completed in 2013 and 2014 as well as the Company's capital program. Total revenues and other for the third quarter 2014 were approximately $1.4 billion, compared to approximately $495 million for the third quarter 2013, which includes non-cash gains related to changes in fair value of unsettled commodity derivatives, including the reduction of put option premium value over time, of approximately $423 million and non-cash losses of $99 million, respectively.

Lease operating expenses for the third quarter 2014 were approximately $192 million, or $1.67 per Mcfe, compared to $87 million, or $1.15 per Mcfe, for the third quarter 2013. Transportation expenses for the third quarter 2014 were approximately $53 million, or $0.47 per Mcfe, compared to $36 million, or $0.47 per Mcfe, for the third quarter 2013. Taxes, other than income taxes, for the third quarter 2014 were approximately $67 million, or $0.58 per Mcfe, compared to $36 million, or $0.48 per Mcfe, for the third quarter 2013. General and administrative expenses for the third quarter 2014 were approximately $75 million, or $0.66 per Mcfe, compared to $45 million, or $0.60 per Mcfe, for the third quarter 2013, which includes approximately $9 million and $8 million, respectively, of noncash unit-based compensation expenses. Depreciation, depletion and amortization expenses for the third quarter 2014 were approximately $290 million, or $2.54 per Mcfe, compared to $209 million, or $2.76 per Mcfe, for the third quarter 2013. Interest expense, net of amounts capitalized, for the third quarter 2014 was approximately $154 million, compared to $104 million for the third quarter 2013.

The Company reported a net loss of approximately $4 million, or $0.02 per unit, for the third quarter 2014, which includes non-cash gains related to changes in fair value of unsettled commodity derivatives, including the reduction of put option premium value over time, of approximately $423 million, or $1.28 per unit, and an impairment charge of approximately $603 million, or $1.83 per unit, related to the divestiture of certain high valued unproved properties in the Midland Basin. This compares to a net loss of approximately $30 million, or $0.13 per unit, for the third quarter 2013, which includes non-cash losses in fair value of unsettled commodity derivatives, including the reduction of put option premium value over time, of approximately $99 million, or $0.42 per unit.

The Company fully covered its distribution and generated excess of net cash provided by operating activities after distributions to unitholders and discretionary adjustments of approximately $88 million for the third quarter 2014 compared to an excess of net cash of approximately $2 million for the third quarter 2013.

Guidance Update

LINN expects production for the fourth quarter 2014 to average between 1,350 to 1,405 MMcfe/d, which equates to full-year 2014 production guidance of 1,203 to 1,227 MMcfe/d. The Company expects to incur a shortfall of net cash provided by operating activities after distributions to unitholders and discretionary adjustments of approximately $94 million for the fourth quarter 2014. Fourth quarter 2014 results are anticipated to include approximately $45 million of negative divestiture-related cash flows from the pending sale of Granite Wash and Cleveland plays and sale of certain Wolfberry properties.

Similarly, the Company had excess of net cash provided by operating activities after distributions to unitholders and discretionary adjustments of approximately $88 million for the third quarter 2013, which included approximately $80 million of positive acquisition-related cash flows from the closed trade with Exxon Mobil and closed acquisitions with Devon and Pioneer.

Hedging Update

The Company is hedged approximately 90 percent to 100 percent on expected natural gas production in 2015 and 2016. LINN is hedged approximately 60 percent to 70 percent in 2015 and approximately 50 percent to 60 percent for 2016 on expected oil production through a combination of swaps, 3-way collars and puts. In addition, the Company has hedged natural gas differentials in certain regions but has not hedged any of its exposure to oil differentials. The Company does not directly hedge NGL volumes. As a result of the significant volume of completed and announced transactions this year, these estimates are preliminary and may change once the Company has completed its 2015 budget process. The Company intends to update these estimates when it issues guidance for 2015.