Linn Energy (LINE) once again unloaded more of its Texas and Oklahoma assets–this time for $2.3 billion–and once again analysts like what Linn is doing. The only problem? Tumbling oil prices. Credit Suisse analyst Abhiram Rajendran and team explain:
LINN continues to chip away at their portfolio transformation, announcing asset sales in the Granite Wash and Permian basin which will fund their recent Devon Energy (DVN) deal and continue to strengthen their balance sheet as well as lower their overall decline rate. We expect additional moves to come as LINN looks to fully exit their Permian Midland basin position, which should facilitate further M&A. All that is positive, but we are also updating our model for a revised commodity deck—given the shift in oil prices, we now push back our distribution growth assumption to early 2017, which lowers our target price by a dollar to $34 which still supports a solid total return outlook. We note that upside to our M&A expectations could bring distribution growth to investors sooner than this.
Of course, Rajendran said less than a month ago that distribution growth would start in 2016.
Shares of Linn Energy have dipped 0.3% to $29 at 1:55 p.m. today, while LinnCo (LNCO) has gained 0.5% to $28.51. Devon Energy has dropped 1% to $65.89.
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