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An Overview of LINN Energy: The Biggest Upstream MLP Loser

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Linn Energy

In the previous article, we analyzed the annualized total return performance of four upstream MLPs:

In this article, we’ll get a brief overview of Linn Energy (LINE). LINE constitutes 1.15% of the First Trust ISE-Revere Natural Gas ETF (FCG).

Linn Energy is involved in crude oil, natural gas, and NGLs (natural gas liquids) exploration and production. Linn’s general partner is held by LinnCo (LNCO). LNCO is structured as a limited liability company, or LLC.

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Linn Energy’s properties

Linn’s crude oil and natural gas assets are located in eight operating regions across the United States:

  • the Rockies
  • the Hugoton Basin
  • California
  • the Midcontinent
  • the Permian Basin
  • TexLa
  • South Texas
  • Michigan and Illinois

According to Linn, “As of December 31, 2014, LINN Energy had approximately 28,000 gross productive oil and natural gas wells and an average proved reserve-life index of approximately 17 years. Additionally, the Company had approximately 7.3 Tcfe of proved reserves, of which approximately 58 percent were natural gas, 28 percent were oil and 14 percent were NGL.” One Tcfe represents one trillion cubic feet equivalents.

Property impairments

The partnership didn’t record any impairment charges for the three months ended June 30, 2015. But during 1Q15, Linn recorded noncash impairment charges of ~$533 million associated with proved oil and natural gas properties. These impairments stem from the decline in commodity prices and apply to the following:

  • Shallow Texas Panhandle Brown Dolomite formation – $278 million
  • California region – $207 million
  • TexLa region – $33 million
  • South Texas region – $9 million
  • Midcontinent region – $6 million

These impairment charges dragged LINE’s 1H15 earnings to -$718 million. In the following part, we’ll discuss its 2Q15 earnings.

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