This MLP is Making Some Bold Moves
Another energy MLP showing operational prowess is Linn Energy (LINE), which reported quarterly earnings of $0.58 per unit, well above the $0.42 forecast. The beat was attributed to a 2.4% increase in oil and natural gas production. These results do not include any additional revenue and profit from the several transactions conducted during the quarter, laying the groundwork for further upside gains in future quarters.
I had wanted to get involved with this enterprise for some time now, and it’s finally cleared my risk/reward hurdle. The company has been under scrutiny for the past year about its accounting methods. Not to be deterred, Linn acquired Berry Petroleum for $4.9 billion, a move that has been immediately accretive to LINE’s distributable cash flow. The SEC got involved to investigate allegations of financial gimmickry but found the accusations to be without merit, gave a thumbs-up to the deal and gave Linn a clean bill of health on its accounting.
Despite some volatility in the share price, the company has maintained its highly attractive payout that translates to a current yield of 9.1% and is paid monthly. With a market cap of $10.5 billion, and approximately 8 trillion cubic feet equivalents (Tcfe) of proven reserves, there is plenty of room for Linn Energy to foster growth through monetizing the Berry Petroleum deal and making future acquisitions of proven reserves — and there’s an upcoming deal involving an asset swap with ExxonMobil (XOM) on the horizon as well.
That’s a recipe for dependable income going forward.