uploads///Linn operating results

Linn Energy’s Operating Results Disappointed in 2Q15

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Sep. 1 2015, Updated 9:07 a.m. ET

Linn Energy’s revenues

Linn Energy’s (LINE) 2Q15 revenues fell to $321.8 million from $596.9 million in 2Q14, a YoY (year-over-year) decline of ~46.1%. The losses were caused by lower crude oil, natural gas, and NGL (natural gas liquids) prices.

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Revenue drivers for LINE

The average realized sale price is an important driver for an upstream company’s revenues. LINE’s average prices for natural gas, crude oil, and NGLs fell from $4.90 per Mcf (million cubic feet), $94.55 a barrel, and $39.14 a barrel in 2Q14 to $2.70 per Mcf, $47.27 a barrel, and $15.58 a barrel in 2Q15, respectively. Average realized prices exclude the impact of hedging activity

Hedging activity is another driver that plays a crucial role in stabilizing revenues for upstream companies during periods of volatile commodity prices. Linn Energy lost $191.2 million on oil and gas derivatives in 2Q15. In 2Q14, the company lost $408.8 million on those derivatives.

Lastly, Linn’s average daily production increased to 1,219 MMcfe (million cubic feet equivalent) per day in 2Q15, due to greater natural gas production. In 2Q14, production totaled 1,131 MMcfe per day. Average daily production increased primarily within the Rockies and the Hugoton Basin regions—the result of recent oil and gas property acquisitions.

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Linn Energy’s adjusted EBITDA

Linn’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) turned negative in 2Q15, coming in at -$41 million compared to $206.9 million in 2Q15. That’s a YoY (year-over-year) decline of ~120%. Less revenue resulting from lower average realized sale prices drove EBITDA down.

Peer comparison

LINE’s peers including Atlas Resource Partners (ARP), Legacy Reserves (LGCY), and Memorial Production Partners (MEMP) saw 2Q15 revenues respectively decline YoY by 11.4%, 8.8%, and 20.4%.

LINE constitutes 1.15% of the First Trust ISE-Revere Natural Gas ETF (FCG).

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