Linn Energy Announces First Quarter 2007 Results and Updated 2007 / 2008 Guidance
HOUSTON, May 15, 2007 (PRIME NEWSWIRE) -- Linn Energy, LLC (Nasdaq:LINE) announced today financial and operating results for the quarter ended March 31, 2007 and guidance for the remainder of 2007 and for 2008.
For the first quarter of 2007 as compared to the fourth quarter of 2006, total production increased 41% to 5.4 Bcfe from 3.8 Bcfe and Adjusted EBITDA increased 53% to $30.8 million from $20.1 million. For the first quarter of 2007 as compared to the first quarter of 2006, total production increased 195% to 5.4 Bcfe from 1.8 Bcfe and Adjusted EBITDA increased 96% to $30.8 million from $15.7 million.
Adjusted EBITDA is a non-GAAP financial measure that is reconciled to its most comparable GAAP financial measure under the heading "Explanation and Reconciliation of Non-GAAP Financial Measures" in this press release.
Conference Call
As previously announced, management will host a teleconference call on Tuesday, May 15, 2007 at 9:00 AM Eastern Time to discuss Linn Energy's first quarter 2007 results and guidance for the remainder of 2007 and for 2008. Prepared remarks by Michael C. Linn, Chairman, President and Chief Executive Officer, and Kolja Rockov, Executive Vice President and Chief Financial Officer, will be followed by a question and answer period.
Investors and analysts are invited to participate in the call by phone at (866) 831-6270 (Passcode: 76049307) or via the internet at www.linnenergy.com. A replay of the call will be available on the Company's website or by phone at (888) 286-8010 (Passcode: 15309293) for a seven-day period following the call.
ABOUT LINN ENERGY
Linn Energy is an independent oil and gas company focused on the development and acquisition of long-lived properties which complement its asset profile in producing basins within the United States. More information about Linn Energy is available on the internet at www.linnenergy.com.
This press release includes "forward-looking statements" within the meaning of the federal securities laws. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements include but are not limited to forward-looking statements about acquisitions and the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, hedging activities, capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to financial performance and results, availability of sufficient cash flow to pay distributions and execute our business plan, prices and demand for oil, gas and natural gas liquids, our ability to replace reserves and efficiently develop our current reserves and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the Securities and Exchange Commission. See "Risk Factors" in the Company's 2006 Annual Report filed on Form 10-K and other public filings and press releases.
Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.
Linn Energy, LLC
Explanation and Reconciliation of Non-GAAP Financial Measures
This press release includes the non-generally accepted accounting principle ("non-GAAP") financial measure of "Adjusted EBITDA." The accompanying schedules provide reconciliations of this non-GAAP financial measure to its most directly comparable financial measure calculated and presented in accordance with United States generally accepted accounting principles ("GAAP"). This non-GAAP financial measure should not be considered as an alternative to GAAP measures, such as net income, operating income or any other GAAP measure of liquidity or financial performance.
We define Adjusted EBITDA as net income (loss) plus:
* Interest expense, net of amounts capitalized; * Depreciation, depletion and amortization; * Write-off of deferred financing fees and other; * (Gain) loss on sale of assets; * Accretion of asset retirement obligation; * Unrealized (gain) loss on oil and gas derivatives; * Unit-based compensation expense and unit warrant expense; * IPO cash bonuses; and * Income tax provision.
Adjusted EBITDA is a significant performance metric used by our management to indicate (prior to the establishment of any reserves by our Board of Directors) the cash distributions we expect to pay our unitholders. Specifically, this financial measure indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Adjusted EBITDA is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships and limited liability companies as a metric of core profitability or to assess the financial performance of assets.
The following table presents a reconciliation of our consolidated net income (loss) to Adjusted EBITDA (Unaudited):
Three Months Ended March 31,
----------------------------
2007 2006
---------- --------
(in thousands)
Net income (loss) $ (67,847) $ 21,977
Plus:
Interest expense, net of
amounts capitalized 9,913 2,639
Depreciation, depletion
and amortization 11,851 3,700
Write-off of deferred
financing fees and other 804 374
(Gain) loss on sale of
assets (945) 18
Accretion of asset
retirement obligation 110 58
Unrealized (gain) loss
on oil and gas derivatives 69,514 (20,923)
Unit-based compensation
and unit warrant expense 3,740 5,680
IPO cash bonuses -- 2,039
Income tax provision (1) 3,632 119
--------- --------
Adjusted EBITDA $ 30,772 $ 15,681
========= ========
--------------------------
(1) The Company's taxable subsidiaries generated net operating losses
for the year ended December 31, 2006. Management has subsequently
recovered expenses through an intercompany charge for services
from Linn Operating, Inc. to Linn Energy, LLC, which resulted in
a corresponding tax expense in first quarter of 2007.
Linn Energy, LLC
Operating Statistics (Unaudited)
Results of Operations - Three Months Ended March 31, 2007 Compared
to Three Months Ended December 31, 2006
Three Months Ended
-------------------------- Percentage
March 31, December 31, Increase
2007 2006 (Decrease)
------------------------------------------
Production:
Gas production
(MMcf) 3,374 2,622 28.7%
Oil production
(MBbls) 215 203 5.9%
Natural gas
liquid
production
(MBbls) 127 -- --
Total
production
(MMcfe) 5,424 3,845 41.1%
Average daily
production
(Mcfe/d) 60,267 41,793 44.2%
Weighted average
realized prices: (1)
Gas (Mcf) $ 8.40 $ 8.84 (5.0)%
Oil (Bbl) (2) $ 64.47 $ 62.19 3.7%
Natural gas
liquid (Bbl) $ 47.92 -- --
Total (Mcfe) $ 8.90 $ 9.31 (4.4)%
Average unit
costs per Mcfe
of production
(non-GAAP):
Operating expenses $ 2.30 $ 1.91 20.4%
General and
administrative
expenses (3) $ 1.27 $ 2.47 (48.6)%
Depreciation,
depletion and
amortization $ 2.18 $ 2.78 (21.6)%
--------------------------
(1) Includes the effect of realized gains of $9.1 million and $8.2
million on oil and gas derivatives for the three months ended
March 31, 2007 and December 31, 2006, respectively.
(2) The majority of our oil production, which is in California, is
sold pursuant to a long-term contract at 79% of NYMEX, and with
gravity increase due to NGL being mixed into the oil stream,
prices realized average approximately 82% of NYMEX.
(3) This is a non-GAAP performance measure used by our management and
is a quantitative measure used in the oil and gas industry. The
measure for the three months ended March 31, 2007 and December
31, 2006 excludes approximately $3.7 million and $7.6 million,
respectively, of unit-based compensation expense and unit warrant
expense. General and administrative expenses including these
amounts was $1.96 per Mcfe and $4.44 per Mcfe for the three
months ended March 31, 2007 and December 31, 2006, respectively.
Linn Energy, LLC
Operating Statistics (Unaudited)
Results of Operations - Three Months Ended March 31, 2007 Compared to
Three Months Ended March 31, 2006
Three Months Ended
March 31, Percentage
-------------------------- Increase
2007 2006 (Decrease)
----------------------------------------
Production:
Gas production
(MMcf) 3,374 1,798 87.7%
Oil production
(MBbls) 215 6 3,483.3%
Natural gas
liquid
production
(MBbls) 127 -- --
Total
production
(MMcfe) 5,424 1,836 195.4%
Average daily
production
(Mcfe/d) 60,267 20,400 195.4%
Weighted average
realized prices: (1)
Gas (Mcf) $ 8.40 $ 9.74 (13.8)%
Oil (Bbl) (2) $ 64.47 $ 58.46 10.3%
Natural gas
liquid (Bbl) $ 47.92 $ -- --
Total (Mcfe) $ 8.90 $ 9.72 (8.4)%
Average unit
costs per Mcfe
of production
(non-GAAP):
Operating
expenses $ 2.30 $ 1.63 41.1%
General and
administrative
expenses (3) $ 1.27 $ 0.97 30.9%
Depreciation,
depletion and
amortization $ 2.18 $ 2.02 7.9%
------------------------
(1) Includes the effect of realized gains of $9.1 million and $3.3
million on oil and gas derivatives for the three months ended
March 31, 2007 and 2006, respectively.
(2) The majority of our oil production, which is in California, is
sold pursuant to a long-term contract at 79% of NYMEX, and with
gravity increase due to NGL being mixed into the oil stream,
prices realized average approximately 82% of NYMEX.
(3) This is a non-GAAP performance measure used by our management and
is a quantitative measure used in the oil and gas industry. The
measure for the three months ended March 31, 2007 and 2006
excludes approximately $3.7 million and $5.7 million,
respectively, of unit-based compensation expense and unit warrant
expense. The measure for the three months ended March 31, 2006
excludes approximately $2.0 million of bonuses paid to certain
executive officers in connection with our initial public
offering. General and administrative expenses including these
amounts was $1.96 per Mcfe and $5.16 per Mcfe for the three
months ended March 31, 2007 and 2006, respectively.
Linn Energy, LLC
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31,
---------------------------
2007 2006
------------ --------
(in thousands,
except per unit amounts)
Revenues:
Oil, gas and natural gas liquid
sales $ 39,204 $ 16,375
Gain (loss) on oil and gas
derivatives (60,441) 24,246
Natural gas marketing revenues 1,778 1,218
Other revenues 2,090 289
-------- --------
(17,369) 42,128
-------- --------
Expenses:
Operating expenses 12,456 2,994
Natural gas marketing expenses 1,347 983
General and administrative
expenses 10,621 9,470
Depreciation, depletion and
amortization 11,851 3,700
-------- --------
36,275 17,147
-------- --------
(53,644) 24,981
Other income and (expenses) (10,571) (2,885)
-------- --------
Income (loss) before income taxes (64,215) 22,096
Income tax provision (3,632) (119)
-------- --------
Net income (loss) $ (67,847) $ 21,977
========= ========
Net income (loss) per unit:
Units - basic $ (1.35) $ 0.84
========= ========
Units - diluted $ (1.35) $ 0.84
========= ========
Linn Energy, LLC
Selected Balance Sheet Data
March 31, December 31,
2007 2006
---------------------------------
(Unaudited)
(in thousands)
Assets
Total current assets $ 52,371 $ 69,676
Oil and gas properties and
related equipment, net 1,209,175 733,289
Property and equipment, net 24,067 20,754
Other assets 89,340 92,589
----------- ---------
Total assets $ 1,374,953 $ 916,308
=========== =========
Liabilities and Unitholders' Capital
Total current liabilities $ 25,480 $ 18,017
Credit facility 596,750 425,750
Other long-term liabilities 42,880 21,587
----------- ---------
Total liabilities 665,110 465,354
Unitholders' capital 709,843 450,954
----------- ---------
Total liabilities and
unitholders' capital $ 1,374,953 $ 916,308
=========== =========
Linn Energy, LLC
Selected Cash Flow Data (Unaudited)
Three Months Ended
March 31,
---------------------------------
2007 2006
---------------------------------
(in thousands)
Net cash provided by (used in)
operating activities $ (37,889) $ 5,400
Net cash used in investing
activities (459,925) (19,493)
Net cash provided by financing
activities 492,195 18,932
----------- ---------
Net increase (decrease) in cash (5,619) 4,839
Cash and cash equivalents:
Beginning 6,595 11,041
----------- ---------
Ending $ 976 $ 15,880
=========== =========
Linn Energy, LLC
Guidance Table
Q2 2007E FY 2007E FY 2008E
-------- -------- --------
Net
production
(1)
------------
Natural
gas
(MMcf) 3,475 - 3,980 15,660 - 17,550 19,000 - 21,000
Oil
(MBbls) 230 - 250 950 - 1,000 1,100 - 1,400
NGL
(MBbls) 170 - 210 905 - 1,030 1,400 - 1,500
Total
(MMcfe) 5,875 - 6,740 26,790 - 29,730 34,000 - 38,400
Average
daily
production
(MMcfe/d) 64.6 - 74.1 73.4 - 81.5 92.9 - 104.9
Other
revenue (2) $750 - $1,250 $3,750 - $5,250 $3,000 - $5,000
% hedged
--------
Natural gas:
% hedged
(including
puts)
(3)(4) 100% - 100% 100% - 100% 97% - 100%
% hedged
(excluding
puts) 57% - 66% 51% - 57% 63% - 70%
Oil:
% hedged
(including
puts) 80% - 87% 79% - 83% 65% - 83%
% hedged
(excluding
puts) 50% - 54% 50% - 53% 40% - 51%
NGL:
% hedged
(including
puts)
(4)(5) 100% - 100% 100% - 100% 80% - 86%
% hedged
(excluding
puts) --- - --- --- - --- --- - ---
Expenses
($ in
thousands)
-----------
Operating
expenses:
LOE and
other $9,500 - $11,500 $42,000 - $45,000 $48,000 - $50,000
Production
taxes 3,000 - 4,000 14,000 - 16,000 19,000 - 21,000
-------- ------- ------- ------- ------- -------
Total
operating
expenses $12,500 - $15,500 $56,000 - $61,000 $67,000 - $71,000
General
and
administrative
expenses
(6) $4,000 - $6,000 $20,000 - $22,000 $21,000 - $24,000
Interest
expense
(7) $10,500 - $11,500 $46,000 - $48,000 $57,000 - $60,000
Drilling and
development
capital
expenditures
($ in thousands)
-----------------
Maintenance $8,000 - $9,000 $28,000 - $32,000 $29,000 - $33,000
Growth 19,000 - 21,000 72,000 - 74,000 74,000 - 76,000
-------- ------- ------- ------- ------- -------
Total
drilling
and
development
capex $27,000 - $30,000 $100,000 -$106,000 $103,000 -$109,000
Linn Energy, LLC
Guidance Table
Q2 FY FY FY FY FY
2007E 2007E 2008E 2009E 2010E 2011E
----- ----- ------ ------ ------ ------
Natural
gas
hedges (3)
----------
Swaps:
Volume
(MMMBtu) 2,277 8,968 13,264 14,605 12,720 12,000
Price
($/MMBtu) $8.69 $8.72 $8.52 $8.01 $7.57 $7.48
Puts:
Volume
(MMMBtu) 2,412 9,126 7,053 6,960 6,960 6,960
Price
($/MMBtu) $8.17 $8.21 $8.07 $7.50 $7.50 $7.50
Total:
Volume
(MMMBtu) 4,689 18,094 20,317 21,565 19,680 18,960
Price
($/MMBtu) $8.43 $8.46 $8.36 $7.85 $7.55 $7.49
% puts 51% 50% 35% 32% 35% 37%
Oil
hedges (8)
------------
Swaps:
Volume
(MBbls) 125 500 560 580 550 525
Price
($/Bbl) $75.83 $75.83 $74.31 $73.87 $74.54 $61.58
Puts:
Volume
(MBbls) 75 292 350 350 500 550
Price
($/Bbl) $71.67 $71.86 $70.71 $70.71 $69.00 $65.00
Total:
Volume
(MBbls) 200 792 910 930 1,050 1,075
Price
($/Bbl) $74.27 $74.37 $72.93 $72.68 $71.90 $63.33
% puts 37% 37% 38% 38% 48% 51%
Oil puts -
NGL
production
(1)(5)(9)
------------
Volume
(MBbls) 300 1,100 1,200 1,200 1,200 1,200
Price
($/Bbl) $65.00 $65.00 $65.00 $65.00 $65.00 $65.00
% puts 100% 100% 100% 100% 100% 100%
Notes to Guidance Table:
(1) Amounts for FY 2007E include partial periods of production associated with acquisitions closed during the year.
(2) Includes sales of propane and electricity in California and natural gas marketing and other income.
(3) Linn Energy's natural gas production in Appalachia has a high Btu content, resulting in a premium to NYMEX natural gas prices. The Company hedges production based on Btu content.
(4) Percentages greater than 100% represented as 100% hedged.
(5) The Company entered into crude oil puts through 2011 to hedge a significant portion of expected NGL revenues associated with the Texas Panhandle acquisition.
(6) Excludes unit-based compensation, which represents a non-cash charge based on equity-related compensation.
(7) Interest expense excludes amortization of deferred financing costs. (8) Oil production in California is sold at approximately 79% of NYMEX under a long-term contract which typically receives a premium of $1.75-$2.00 per barrel based on higher API gravity.
(9) Based on an historical NGL price realization to NYMEX crude of greater than 70% in the Texas Panhandle.
These estimates are meant to provide guidance only and are subject to revision as the operating environment of the Company changes.
CONTACT: Linn Energy
Kolja Rockov, Executive Vice President and CFO
(281) 605-4169
Jeanine DeLay, Manager, Investor Relations
(281) 605-4144