Exhibit 99.1
FOR IMMEDIATE RELEASE
LINN ENERGY ANNOUNCES 2006 RESULTS AND 2007 / 2008 GUIDANCE
Houston, Texas, March 29, 2007 — 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.
CONTACTS: | | Kolja Rockov | | Jeanine DeLay |
| | Executive Vice President and CFO | | Manager, Investor Relations |
| | 281-605-4169 | | 281-605-4144 |
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
1
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.
(Financial Summary Follows)
2
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.
3
The following table presents a reconciliation of our consolidated net income (loss) to Adjusted EBITDA (Unaudited):
| | Three Months Ended
December 31, | | Year Ended
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.
4
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.
5
