Linn Energy swings to Q2 loss

Output aims: Linn ramps up production but books net losses on derivatives

Houston’s Linn Energy swung to a net loss in the second quarter on non-cash derivative losses during a period in which the explorer signed a string of still-pending large acquisition and divestment deals.

The US onshore-focused explorer booked a net loss of around $208 million for the quarter versus a profit of $345 million in the second quarter of last year.

Linn Energy said it had recorded non-cash losses related to changes in fair value of unsettled commodity derivatives of around $393 million for the second quarter, compared to non-cash gains of $271 million in the same period last year.

Average daily production rose 45% compared to output in the second quarter of last year to reach around 1.13 million cubic feet of equivalent per day, in a rise put down to the impact of its acquisitions made in the past 12 months as well as development activities.

Chief executive Mark Ellis said that production growth exceeding guidance for the quarter showed the merits of the company’s capital programme and asset management.

He added that the deals signed matched the explorer’s strategy to lower its capital intensity and overall decline rate.

During the quarter, Linn Energy struck an asset swap deal with ExxonMobil to exchange its Wolfcamp and Spraberry acreage in West Texas for the supermajor’s acreage in the Hugoton gas field in Kansas and Oklahoma.

The company also splashed out $2.3 billion on a set of five US assets from Devon Energy and $340 million on Hugoton Basin properties from Pioneer Natural Resources.

It also sold Anadarko Basin acreage for $90 million to a private player.

The company said it expected the cumulative effect of the deals that are set to close in the third and fourth quarters would be to reduce the explorer’s capital run rate by between $300 million and $400 million.

Linn Energy expects third-quarter and full-year output to reach 1.21 million to 1.26 million cubic feet of equivalent per day.

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