Linn Energy LLC (NASDAQ: LINE) Lowers Its Budget For 2015

The oil and gas companies are not quite confident as to whether the year 2015 will bring good luck for them or not. Some of the companies have lowered their spending in order to cover the losses whereas others have cut down on the distributions and dividends. Linn Energy LLC (NASDAQ: LINE) also joined the club on January 02, 2015.

On the Friday morning, Linn Energy announced that it would be investing around $730 million in the capital spending for the year 2015. It is important to mention here that the company invested $1.55 billion in this category in the year 2014. The decline in spending came to 53 percent. Moreover, the company will also be paying lower amounts in dividends. According to the management, it will pay $1.25 per share for its common unit for the year 2014. Previously, the dividends were at $2.90 per share. The subsidiary company of Linn Energy LLC (NASDAQ: LINE), LinnCo LLC (NASDAQ: LNCO) will not be paying any dividends whatsoever.

The company will be funding its dividend distributions and capital spending for the year 2015 from the cash flow that it generated internally. If the company borrows some money in order to fill the gap, chances are that the interest rate would be very high. Not to mention the fact that the company already has a lot of debt on its head. The total debt of Linn Energy LLC (NASDAQ: LINE) had reached $11 billion by the end of the third quarter of the year 2014. Moreover, the share value of the company is way lower than its book value, with a market capitalization of $3.77 billion.

Linn Energy has sealed a contract with GSO Capital Partners, a private equity firm. GSO will provide funds of $500 million over the course of 5 years in order to provide for the costs of the new well of Linn Energy. In return, the equity firm will be enjoying 85 percent of the total working interest of the well. Once GSO’s internal rate of return reaches 15 percent, the company will be getting working interest of 5 percent whereas the interest of Linn Energy will be 95 percent.

According to Linn Energy LLC (NASDAQ: LINE), the company has decided to lower its capital spending due to the decrease in the prices of commodities and properties in the region of West Texas. The company further said that it would be focusing on low risk projects from now on. The sites for its latest projects will include Colorado, California, Texas, North Dakota and Louisiana.

The common stocks of the company saw a decline of 11 percent on the last trading day. The price of those stocks came close to the 52-week low of $8.58. The consensus target price on Linn Energy LLC’s (NASDAQ: LINE) stocks is $18.25.

On January 02, 2015, the stocks of LinnCo came down by 12 percent and traded at $9.15. The price target of the company stands at $20.43 from the ratings of 10 analysts.