Linn Energy LLC (NASDAQ:LINE) was cut to “Neutral” from “Outperform” at RW Braid. The analysts also cut their target price on the stock to $10 from $21 while citing challenges in the oil market. They believe that Linn Energy and its peers will be compelled to slash their cash distribution as oil prices continue to fall.
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How long oil prices will continue to fall is the most important question investors are asking right now. When it comes to Linn Energy LLC (NASDAQ:LINE), the question becomes how bad is the falling oil prices bad for Linn Energy. The company has a history of making investors happy through ways that include cash distribution, but can it weather the storm that is sweeping across the oil and gas industry?
When it comes to Linn Energy LLC (NASDAQ:LINE)’s ability to withstand the current market challenge, it becomes important to know how the company is reacting to the market developments. Additionally, understanding how the company does it business is also important at this juncture.
Reacting to the market challenge
Most oil companies are currently issuing reduced 2015 capital spending updates. Such moves are aimed at saving money in the face of falling oil prices. Offloading of non-core assets is also a common trend now in the oil industry, and Linn Energy LLC (NASDAQ:LINE) seems to be part of that practice. The company recently announced closing a deal to transfer its interest in two plays known as Granite Wash and Cleveland. The company is expected to tap about $1.95 billion from the asset sales.
The sale of such non-core assets is expected to boost the company’s cash positions, which is important in the current volatile market.
Although the fallout in the oil industry is causing havoc almost everywhere in the industry, it is good to know that Linn Energy LLC (NASDAQ:LINE) sells its oil through hedging deals. Such deals cushion the company from unexpected price decline. That means that the ongoing slide in oil prices is not expected to have an immediate impact on the company’s finances.
Financial highlight
Linn Energy LLC (NASDAQ:LINE) disclosed revenue of more than $1.4 billion in the most recent quarter, which was above $1.3 billion in the prior quarter. The company closed the recent quarter with $59.16 million in the treasury, compared with $38.34 million in the previous quarter.
Technicals
Linn Energy LLC (NASDAQ:LINE) had a sharp fall in the middle of the year 2013, which was gradually recovered by the end of the year, but the price failed to register even a new swing high in the following months. The entire price action took a contracting shape with lower highs and higher lows, which was broken 3 months back. The following vertical crash has already tested the 2008 lows and bounced back sharply to form a very bullish Hammer candle on the weekly charts, which must stay above $12.05 the end of the week to keep the bullish implications alive.
