HOUSTON, March 29, 2007 (PRIME NEWSWIRE) -- Linn Energy, LLC (Nasdaq:LINE) announced today financial and operating results for the year ended December 31, 2006 and guidance for 2007 and 2008. The Company demonstrated significant growth through acquisitions, and generated the following performance highlights for year end of 2006 as compared to the year end of 2005:
* Proved reserves increased 135% to 454.1 Bcfe from 193.2 Bcfe * Total production increased 124% to 10.8 Bcfe from 4.8 Bcfe * Adjusted EBITDA increased 246% to $75.1 million from $21.7 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.
Adjusted EBITDA includes approximately $4-$5 million of additional general and administrative expenses due to costs incurred to close acquisitions that were not able to be capitalized and costs incurred to position the Company for future growth. Examples of these costs include additional accounting and legal fees, integration and transition expenses, due diligence costs, search fees to hire key personnel and additional expenses associated with a rapidly expanding operational and accounting staff. In addition, Adjusted EBITDA includes approximately $1.3 million of well workover expenses previously budgeted as maintenance capital expenditures but which were ultimately classified as operating expense.
Conference Call
As previously announced, management will host a teleconference call on Thursday, March 29, 2007 at 9:00 AM Eastern Time to discuss Linn Energy's year end 2006 results and its outlook for the 2007 fiscal year. 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 (888) 396-2369 (Passcode: 16131604) 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: 56172533) 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. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements about the acquisitions and the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including as to 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 and gas, 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.
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; * (Gain) loss on sale of assets; * (Gain) loss from equity investment; * Accretion of asset retirement obligation; * Unrealized (gain) loss on oil and gas derivatives; * Realized (gain) loss on cancelled natural gas derivatives; * Unit-based compensation expense; * IPO cash bonuses; and * Income tax provision.
The costs of cancelling natural gas swaps before their original settlement date are adjustments to Adjusted EBITDA that require expenditure of cash. These costs were financed with borrowings under our credit facility, and such long term debt is recognized as an increase in cash from financing activities.
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 Year Ended
December 31, December 31,
-------------------- ---------------------
2006 2005 2006 2005
-------- -------- -------- ---------
(in thousands)
Net income (loss) $ (7,088) $ 6,914 $ 78,185 $(56,351)
Plus:
Interest expense,
net of amounts
capitalized 8,955 3,783 25,494 7,040
Depreciation,
depletion and
amortization 11,703 3,259 25,173 7,294
Write-off of
deferred financing
fees 2,678 (25) 3,342 364
Loss on sale of
assets 72 (4) 72 39
Loss from equity
investment -- -- -- 17
Accretion of asset
retirement
obligation 134 48 314 172
Unrealized (gain)
loss on oil and
gas derivatives (600) (2,012) (77,776) 24,776
Realized loss on
cancelled natural
gas derivatives (1) -- -- -- 38,281
Unit-based
compensation expense 7,576 -- 21,643 --
IPO cash
bonuses -- -- 2,039 --
Income tax
(benefit)
provision (2) (3,328) (311) (3,402) 74
-------- -------- -------- --------
Adjusted EBITDA $ 20,102 $ 11,652 $ 75,084 $ 21,706
======== ======== ======== ========
---------------
(1) During the year ended December 31, 2005, we cancelled (before
their original settlement date) a portion of out-of-the-money
natural gas swaps and realized a loss of $38.3 million. We
subsequently hedged similar volumes at higher prices.
(2) The Company's taxable subsidiaries generated net operating
losses for the year. Management has subsequently recovered
expenses through an intercompany charge for services from Linn
Operating, Inc. to Linn Energy, LLC, which should result in
a corresponding tax expense in first quarter of 2007.
Linn Energy, LLC
Operating Statistics (Unaudited)
Year Ended
December 31, Percentage
-------------------- Increase
2006 2005 (Decrease)
------- ------- ----------
Production:
Gas production (MMcf) 8,599 4,720 82.2%
Oil production (MBbls) 370 20 *
Total production (MMcfe) 10,818 4,839 *
Average daily production
(Mcfe/d) 29,638 13,258 *
Weighted Average Realized
Prices: (1)
Gas (Mcf) $ 9.79 $ 6.92 41.5%
Oil (Bbl) (2) $ 58.68 $ 52.55 11.7%
Total (Mcfe) $ 9.79 $ 6.97 40.5%
Average Unit Costs per Mcfe
(Non- GAAP):
Operating expenses $ 1.67 $ 1.52 9.9%
General and
administrative
expenses (3) $ 0.63 $ 0.69 (8.7)%
Depreciation, depletion
and amortization $ 2.33 $ 1.51 54.3%
---------------------------
(1) Includes the effect of realized gains of $25.5 million and
realized losses of $13.1 million on oil and gas derivatives for
the years ended December 31, 2006 and 2005, 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 NGLs being mixed into the oil stream,
prices realized average approximately 82% 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 quarter ended December 31, 2006 excludes
approximately $7.6 million of unit-based compensation expense. The
measure for the year ended December 31, 2006 excludes
approximately $21.6 million of unit-based compensation expense and
$2.0 million of bonuses paid to certain executive officers in
connection with our IPO. General and administrative expenses
including these amounts were $4.44 and $3.70 per Mcfe for the
quarter and year ended December 31, 2006, respectively.
* Amount is greater than 100%, therefore is not meaningful.
Linn Energy, LLC
Condensed Consolidated Statements of Operations
Three Months Ended Year Ended
December 31, December 31,
-------------------- --------------------
2006 2005 2006 2005
------- -------- --------- --------
(Unaudited) (Unaudited)
(in thousands, except per unit amounts)
Revenues:
Oil and gas sales $ 26,983 $ 20,237 $ 80,393 $ 44,645
Gain (loss) on oil
and gas derivatives 8,771 (3,583) 103,308 (76,193)
Natural gas marketing
revenues 1,944 1,635 5,598 4,722
Other revenues 1,001 187 1,759 345
------- ------- -------- -------
38,699 18,476 191,058 (26,481)
------- ------- -------- -------
Expenses:
Operating expenses 7,327 2,665 18,099 7,356
Natural gas marketing
expenses 1,736 1,239 4,862 4,401
General and
administrative
expenses 17,059 987 39,993 3,332
Depreciation,
depletion and
amortization 11,703 3,259 25,173 7,294
------- ------- -------- -------
37,825 8,150 88,127 22,383
------- ------- -------- -------
874 10,326 102,931 (48,864)
------- ------- -------- -------
Other income and
(expenses) (11,290) (3,723) (28,148) (7,413)
Income (loss) before
income taxes (10,416) 6,603 74,783 (56,277)
Income tax benefit
(provision) 3,328 311 3,402 (74)
------- ------- -------- -------
Net income (loss) $ (7,088) $ 6,914 $ 78,185 $(56,351)
------- ------- -------- -------
Net income (loss)
per unit:
------- ------- -------- -------
Units - basic $ (0.18) $ 0.34 $ 2.60 $ (2.75)
======= ======= ======== =======
Units - diluted $ (0.18) $ 0.34 $ 2.57 $ (2.75)
======= ======= ======== =======
Linn Energy, LLC
Selected Balance Sheet Data
December 31,
-----------------------
2006 2005
--------- ---------
(Unaudited)
(in thousands)
Assets
Total current assets $ 69,676 $ 34,733
Oil and gas properties and related
equipment, net 732,289 239,293
Property and equipment, net 20,754 2,525
Other assets 92,589 4,373
--------- ---------
Total assets $ 915,308 $ 280,924
========= =========
Liabilities and Unitholders' Capital (Deficit)
Total current liabilities $ 18,017 $ 86,557
Credit facility 425,750 207,000
Other long-term liabilities 21,587 34,198
--------- ---------
Total liabilities 465,354 327,755
--------- ---------
Unitholders' capital (deficit) 449,954 (46,831)
--------- ---------
Total liabilities and unitholders'
capital (deficit) $ 915,308 $ 280,924
========= =========
Linn Energy, LLC
Selected Cash Flow Data
Year Ended
December 31,
-----------------------
2006 2005
--------- ---------
(Unaudited)
(in thousands)
Net cash used in operating activities $ (6,805) $ (29,518)
Net cash used in investing activities (551,631) (150,898)
Net cash provided by financing
activities 553,990 189,269
--------- ---------
Net increase (decrease) in cash (4,446) 8,853
Cash and cash equivalents:
Beginning 11,041 2,188
--------- ---------
Ending $ 6,595 $ 11,041
========= =========
Linn Energy, LLC
Guidance Table
Q1 2007E FY 2007E
-------- --------
Net production (1)
Natural gas (MMcf) 3,238 - 3,489 15,619 - 17,469
Oil (MBbls) 200 - 211 879 - 937
NGL (MBbls) 130 - 145 898 - 1,019
-----------------------------------------
Total (MMcfe) 5,218 - 5,625 26,281 - 29,205
=========================================
Average daily production
(MMcfe/d) 58.0 - 62.5 72.0 - 80.0
Other revenue (2) $1,175 - $1,575 $4,700 - $6,300
% hedged
Natural gas:
% hedged (including
puts) (3) (4) 100% - 100% 100% - 100%
% hedged (excluding
puts) 66% - 71% 51% - 57%
Oil:
% hedged (including puts) 91% - 96% 85% - 90%
% hedged (excluding puts) 59% - 63% 53% - 57%
NGL:
% hedged (including
puts) (4) (5) 100% - 100% 100% - 100%
% hedged (excluding puts) --- - --- --- - ---
Expenses ($ in thousands)
Operating expenses:
LOE and other $5,500 - $6,000 $24,000 - $25,000
Production taxes 2,500 - 3,000 13,500 - 14,200
-----------------------------------------
Total operating expenses $8,000 - $9,000 $37,500 - $39,200
=========================================
General and
administrative
expenses (6) $4,000 - $6,000 $15,000 - $17,000
Interest expense (7) $9,200 - $9,600 $42,000 - $43,000
Drilling and development
capital expenditures ($
in thousands)
Maintenance $4,500 - $5,000 $28,000 - $30,000
Growth 11,000 - 11,500 69,000 - 71,000
-----------------------------------------
Total drilling and
development capex $15,500 - $16,500 $97,000 - $101,000
=========================================
FY 2008E
--------
Net production (1)
Natural gas (MMcf) 18,228 - 20,075
Oil (MBbls) 1,014 - 1,073
NGL (MBbls) 1,314 - 1,435
-------------------
Total (MMcfe) 32,195 - 35,120
===================
Average daily production
(MMcfe/d) 88.0 - 96.0
Other revenue (2) $4,600 - $6,200
% hedged
Natural gas:
% hedged (including
puts) (3) (4) 86% - 95%
% hedged (excluding puts) 51% - 56%
Oil:
% hedged (including puts) 85% - 90%
% hedged (excluding puts) 52% - 55%
NGL:
% hedged (including
puts) (4) (5) 84% - 91%
% hedged (excluding puts) --- - ---
Expenses ($ in thousands)
Operating expenses:
LOE and other $25,000 - $26,000
Production taxes 16,500 - 17,500
-------------------
Total operating expenses $41,500 - $43,500
===================
General and
administrative
expenses (6) $15,500 - $17,500
Interest expense (7) $48,000 - $49,000
Drilling and development
capital expenditures ($
in thousands)
Maintenance $28,000 - $30,000
Growth 69,000 - 71,000
-------------------
Total drilling and
development capex $97,000 - $101,000
===================
Linn Energy, LLC
Guidance Table (contd)
Q1 2007E FY 2007E FY 2008E
-------- -------- --------
Natural gas hedges (3)
----------------------
Swaps:
Volume (MMMBtu) 2,295 8,968 10,264
Price ($/MMBtu) $8.68 $8.72 $8.37
Puts:
Volume (MMMBtu) 1,876 9,126 7,053
Price ($/MMBtu) $8.32 $8.21 $8.07
% puts 45% 50% 41%
Total:
Volume (MMMBtu) 4,171 18,094 17,317
Price ($/MMBtu) $8.52 $8.46 $8.25
Oil hedges (8)
--------------
Swaps:
Volume (MBbls) 125 500 560
Price ($/Bbl) $75.83 $75.83 $74.31
Puts:
Volume (MBbls) 67 292 350
Price ($/Bbl) $72.50 $71.86 $70.71
% puts 35% 37% 38%
Total:
Volume (MBbls) 192 792 910
Price ($/Bbl) $74.67 $74.37 $72.93
Oil puts - NGL production
(1) (5) (9)
-------------------------
Volume (MBbls) 200 1,100 1,200
Price ($/Bbl) $65.00 $65.00 $65.00
Notes to Guidance Table:
(1) The amount for FY 2007E reflects production for the partial
period beginning from February 1 for the Texas Panhandle
acquisition.
(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.