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LINN Energy, the Houston-based company that owns the Placerita Oil Field in Newhall through its subsidiary Berry Petroleum Co., filed quarterly and full-year financial statements with the Securities and Exchange Commission Tuesday.

As previously announced, LINN cannot meet its debt obligations due to the decline in oil and gas prices over the last two years.

Of local interest, according to LINN’s current 10-K filing, “Berry is required to maintain mortgages on properties representing at least 90 percent of the present value of its oil and natural gas proved reserves.”

Also: “Berry’s Second Amended and Restated Credit Agreement had a borrowing base of $900 million , subject to lender commitments, as of December 31, 2015 . The maturity date is April 2019. At December 31, 2015 , lender commitments under the facility were also $900 million but there was less than $1 million of available borrowing capacity, including outstanding letters of credit.”

Below, from its annual (10-K) filing, is the company’s statement of uncertainty about its ability to continue to function as a going concern.

Following that is the company’s press release about its quarterly and full-year 2015 earnings.

 

 

Going Concern Uncertainty

The Company’s liquidity outlook has changed since the third quarter of 2015 due to continued low commodity prices, which are expected to result in significantly lower levels of cash flow from operating activities in the future as the Company’s current commodity derivative contracts expire, and have limited the Company’s ability to access the capital markets. In addition, each of the Company’s Credit Facilities is subject to scheduled redeterminations of its borrowing base, semi-annually in April and October, based primarily on reserve reports using lender commodity price expectations at such time. Continued low commodity prices, reductions in the Company’s capital budget and the resulting reserve write-downs, along with the maturity schedule of the Company’s hedges, are expected to adversely impact the upcoming April redeterminations and will likely have a significant negative impact on the Company’s liquidity.

As a result of these and other factors, the following issues have adversely impacted the Company’s ability to continue as a going concern:

* the Company’s ability to comply with financial covenants and ratios in its Credit Facilities and indentures has been affected by continued low commodity prices. Absent a waiver or amendment, failure to meet these covenants and ratios would result in a default and, to the extent the applicable lenders so elect, an acceleration of the Company’s existing indebtedness, causing such debt of approximately $3.6 billion to be immediately due and payable. Based on the Company’s current estimates and expectations for commodity prices in 2016, the Company does not expect to remain in compliance with all of the restrictive covenants contained in its Credit Facilities throughout 2016 unless those requirements are waived or amended. The Company does not currently have adequate liquidity to repay all of its outstanding debt in full if such debt were accelerated;

* because the Credit Facilities are effectively fully drawn, any reduction of the borrowing bases under the Company’s Credit Facilities would require mandatory prepayments to the extent existing indebtedness exceeds the new borrowing bases. The Company may not have sufficient cash on hand to be able to make any such mandatory prepayments; and

* the Company’s ability to make interest payments as they become due and repay indebtedness upon maturities (whether under existing terms or as a result of acceleration) is impacted by the Company’s liquidity. As of February 29, 2016, there was less than $1 million of available borrowing capacity under the Credit Facilities.

The Company’s Credit Facilities contain the requirement to deliver audited consolidated financial statements without a going concern or like qualification or exception. Consequently, as of the filing date, March 15, 2016, the Company is in default under the LINN Credit Facility. If the Company is unable to obtain a waiver or other suitable relief from the lenders under the LINN Credit Facility prior to the expiration of the 30 day grace period, an Event of Default (as defined in the applicable agreements) will result and the lenders holding a majority of the commitments under the LINN Credit Facility could accelerate the outstanding indebtedness, which would make it immediately due and payable. If the Company is unable to obtain a waiver from or otherwise reach an agreement with the lenders under the LINN Credit Facility and the indebtedness under the LINN Credit Facility is accelerated, then an Event of Default under LINN Energy’s senior notes and second lien notes would occur, which, if it continues beyond any applicable cure periods, would, to the extent the applicable lenders so elect, result in the acceleration of those obligations. Furthermore, an Event of Default under the LINN Credit Facility will also result in an Event of Default under the Berry Credit Facility, which in the absence of a waiver or other suitable relief and upon the election of the agent or lenders holding a majority of commitments under the Berry Credit Facility would result in the acceleration of indebtedness under the Berry Credit Facility. Such Event of Default would trigger an Event of Default under the Berry senior notes. If such Event of Default continues beyond any applicable cure periods, such Event of Default would result in an acceleration of the Berry senior notes.

Additionally, the indenture governing the second lien notes (“Second Lien Indenture”) required the Company to deliver mortgages by February 18, 2016, subject to a 45 day grace period. The Company elected to exercise its right to the grace period and not deliver the mortgages, and as a result, the Company is currently in default under the Second Lien Indenture. If the Company does not deliver the mortgages within the 45 day grace period or is otherwise unable to obtain a waiver or other suitable relief from the holders under the Second Lien Indenture prior to the expiration of the 45 day grace period, an Event of Default (as defined in the Second Lien Indenture) will result and if the trustee or noteholders holding at least 25% in the aggregate outstanding principal amount of the second lien notes so elect would accelerate the second lien notes causing them to be immediately due and payable.

Furthermore, the Company has decided to defer making interest payments totaling approximately $60 million due March 15, 2016, including approximately $30 million on LINN Energy’s 7.75% senior notes due February 2021, approximately $12 million on LINN Energy’s 6.50% senior notes due September 2021 and approximately $18 million on Berry’s senior notes due September 2022, which will result in the Company being in default under these senior notes. The indentures governing each of the applicable series of notes permit the Company a 30 day grace period to make the interest payments. If the Company fails to make the interest payments within the grace period, or is otherwise unable to obtain a waiver or suitable relief from the holders of these senior notes, an Event of Default will result and if the trustee or noteholders holding at least 25% in the aggregate outstanding principal amount of each series of notes so elect would accelerate the notes causing them to be immediately due and payable.

An Event of Default under the Second Lien Indenture or any of the indentures governing the senior notes triggers a cross-default under the LINN Credit Facility and Berry Credit Facility and, as discussed above, if the applicable lenders so elect would result in acceleration under the LINN Credit Facility and Berry Credit Facility. In addition, as discussed above, an acceleration of the obligations under the Second Lien Indenture or LINN Credit Facility would trigger a cross-default to LINN Energy’s senior notes and if the applicable lenders so elect would result in a cross-acceleration under LINN Energy’s senior notes, and an acceleration of the Berry Credit Facility if the applicable lenders so elect would result in cross-acceleration under the Berry senior notes.

If lenders, and subsequently noteholders, accelerate the Company’s outstanding indebtedness (approximately $9.0 billion as of December 31, 2015 ), it will become immediately due and payable and the Company will not have sufficient liquidity to repay those amounts. If the Company is unable to reach an agreement with its creditors prior to any of the above described accelerations, the Company could be required to immediately file for protection under Chapter 11 of the U.S. Bankruptcy Code.

The significant risks and uncertainties described above raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.

The Company is currently in discussions with various stakeholders and is pursuing or considering a number of actions including: (i) obtaining additional sources of capital from asset sales, private issuances of equity or equity-linked securities, debt for equity swaps, or any combination thereof; (ii) pursuing in- and out-of-court restructuring transactions; (iii) obtaining waivers or amendments from its lenders; and (iv) continuing to minimize its capital expenditures, reduce costs and maximize cash flows from operations. There can be no assurance that sufficient liquidity can be obtained from one or more of these actions or that these actions can be consummated within the period needed.

 

 

berry-linnenergyCompany Press Release

HOUSTON, March 15, 2016 — LINN Energy LLC and LinnCo LLC announced today financial and operating results for the fourth quarter and year ended December 31, 2015, and outlook for 2016.

LINN Energy reported the following fourth quarter and full-year 2015 results:

  • Average daily production of approximately 1,134 MMcfe/d for the fourth quarter 2015 and full-year 2015 production of approximately 1,188 MMcfe/d;
  • Total revenues of approximately $647 million for the fourth quarter 2015, which includes gains on oil and natural gas derivatives of approximately $274 million; and full-year 2015 total revenues of approximately $2.9 billion, which includes gains on oil and natural gas derivatives of approximately $1.1 billion;
  • Lease operating expenses of approximately $150 million, or $1.44 per Mcfe, for the fourth quarter 2015 and approximately $618 million, or $1.42 per Mcfe for the full-year 2015;
  • Net loss of approximately $2.5 billion, or $7.05 per unit, for the fourth quarter 2015, which includes non-cash impairment charges of approximately $3.0 billion, or $8.63 per unit, non-cash losses related to changes in fair value of unsettled commodity derivatives of approximately $83 million, or $0.24 per unit, and non-cash gains on extinguishment of debt of approximately $506 million, or $1.44 per unit. For full-year 2015, the Company reported a net loss of approximately $4.8 billion, or $13.87 per unit, which includes non-cash impairment charges of approximately $5.8 billion, or $16.93 per unit, non-cash losses related to changes in fair value of unsettled commodity derivatives of approximately $154 million, or $0.45 per unit, non-cash gains on extinguishment of debt of approximately $719 million, or $2.09 per unit, and gains on sale of assets and other of approximately $197 million, or $0.57 per unit;
  • For the fourth quarter 2015, after discretionary adjustments considered by the Board of Directors, the Company had an excess of approximately $223 million of net cash provided by operating activities after funding its interest costs and total oil and natural gas development costs (“excess cash”); and for the full-year 2015, including distributions paid through September 2015, the Company had excess cash of approximately $368 million (see Schedule 1);
  • Estimated net positive mark-to-market hedge book value of approximately $1.8 billion as of December 31, 2015; and
  • Non-cash impairment of long-lived assets of approximately $3.0 billion for the fourth quarter 2015 and approximately $5.8 billion for the full-year 2015, primarily driven by lower commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves.

The Company highlighted the following significant 2015 accomplishments:

  • Reduced total debt, excluding interest payable on second lien notes, by approximately $1.9 billion;
  • Achieved combined cost reductions in lease operating expenses, general and administrative expenses, interest costs and capital costs of over $300 million on an annualized basis; and
  • Funded full-year 2015 total oil and natural gas capital expenditures, along with distributions paid through September 2015, from net cash provided by operating activities.

“I am pleased with the strong operational results the Company generated for the fourth quarter and full-year 2015,” said Mark E. Ellis, Chairman, President and Chief Executive Officer. “We were able to achieve significant cost savings and continued to operate our asset base efficiently through the outstanding work of our employees and support from our vendors, suppliers and partners.”

Going Concern Audit Reports

Based on current estimates and expectations for commodity prices in 2016, LINN does not expect to remain in compliance with all of the restrictive covenants contained in its credit facilities throughout 2016 unless those requirements are waived or amended.  As a result, indebtedness under the credit facilities could, after the expiration of any grace period and at the election of a majority of the lenders under the credit facilities, be accelerated and become immediately due and payable. The uncertainty associated with LINN’s ability to meet its obligations as they become due raises substantial doubt about the Company’s ability to continue as a going concern. The report of LINN’s independent registered public accounting firm that accompanies its audited consolidated financial statements in LINN’s Annual Report on Form 10-K contains an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue as a going concern.

As of December 31, 2015, LinnCo had income taxes payable of approximately $30 million and cash of approximately $11 million. Its only significant asset is its interest in LINN and its cash flow, which was historically used to pay dividends to LinnCo shareholders, is completely dependent upon the ability of LINN to make distributions to its unitholders. In October 2015, LINN suspended the payment of its distribution. The uncertainty associated with LinnCo’s ability to meet its obligations as they become due raises substantial doubt about its ability to continue as a going concern. The report of LinnCo’s independent registered public accounting firm that accompanies its audited financial statements in LinnCo’s Annual Report on Form 10-K contains an explanatory paragraph regarding the substantial doubt about LinnCo’s ability to continue as a going concern.

Strategic Alternatives Related to the Company’s Capital Structure

LINN’s Board of Directors and management are in the process of evaluating strategic alternatives to help strengthen its balance sheet and maximize the value of the Company. As part of this process, LINN has elected to exercise its 30-day grace period with respect to interest payments due March 15, 2016 of approximately $30 million on its 7.75% senior notes due February 2021, approximately $12 million on its 6.50% senior notes due September 2021 and approximately $18 million on the Berry Petroleum Company, LLC (“Berry”) senior notes due September 2022.  If LINN fails to make the interest payments within the 30-day grace period and is otherwise unable to obtain a waiver or other suitable relief from the holders under the indentures governing the senior notes prior to the expiration of the 30-day grace period, the default under the indentures will mature into an event of default, allowing the noteholders to accelerate the outstanding indebtedness under the senior notes.

“We are continuing to work with our advisors to review a full range of strategic alternatives to reduce the Company’s overall debt,” said Mr. Ellis. “In addition, we have been in discussions with certain lenders in an effort to reach a mutually agreeable resolution and remain focused on right sizing the balance sheet in order to position the Company for long-term success.”

LINN does not intend to make any future announcements concerning this process unless and until the Company otherwise determines that disclosures are necessary or appropriate.  As previously announced, LINN has retained Lazard as its financial advisor and Kirkland & Ellis LLP as its legal advisor to assist the Board of Directors and management team with the strategic review process.

2016 Oil and Natural Gas Capital Budget and Guidance Overview

LINN has approved a 2016 capital budget of approximately $340 million. The 2016 budget includes $250 million of oil and natural gas capital expenditures, which represents a 44 percent reduction from approximately $450 million spent to develop oil and natural gas properties in 2015. LINN also plans to spend approximately $75 million of plant and pipeline capital. The Company expects to fund its 2016 oil and natural gas capital program primarily from internally generated cash flow.

Key 2016 budget assumptions include:

  • Average annual production of 980 – 1,070 MMcfe/d
    • 56 percent natural gas;
    • 30 percent oil;
    • 14 percent NGL;
  • On a consolidated basis, natural gas production hedged approximately 100 percent, net of expected natural gas consumption related to operations in California; and
  • On a consolidated basis, oil production hedged approximately 80 percent.

The 2016 oil and natural gas capital budget remains focused on a well-diversified mix of development and optimization projects. LINN expects to spend approximately 38 percent of its oil and natural gas budget on the SCOOP/STACK play, 23 percent on optimization projects, 16 percent in the Williston Basin, 13 percent in California and 10 percent in the Green River Basin. The Company expects to spend 34 percent of its oil and natural gas capital budget on non-operated projects.  LINN currently has an overall base decline rate of approximately 13 percent. The Company’s full-year 2016 production is expected to be approximately 14 percent lower than full-year 2015 production, which includes approximately 50 MMcfe/d of marginal well shut-ins.

Updated operational and financial guidance is provided in the supplemental information posted atwww.linnenergy.com.

Operations Update

At year-end, LINN was operating two drilling rigs with one rig drilling in California and a second rig drilling the first operated horizontal well in the Tuttle area of Oklahoma (SCOOP). The Company anticipates drilling 8-10 operated wells in addition to our participation in several non-operated wells in the Tuttle area during 2016 in an effort to further de-risk LINN’s approximate 35,000 net acre position. In addition, LINN drilled its first operated horizontal well in the Ruston area with initial production of approximately 22 MMcfe/d. Recompletion and optimization activities continue across several other business units with excellent performance results.

Given the low commodity price environment, the Company is implementing a strategy for marginal well shut-ins. LINN anticipates this marginal well shut-in program will impact 2016 production by approximately 50 MMcfe/d. The Company expects to have approximately 1,000 wells shut-in as a result of this strategy.

Liquidity Update

In February 2016, the Company borrowed approximately $919 million under LINN’s Sixth Amended and Restated Credit Agreement (“Credit Facility”), which represented the remaining undrawn amount that was available under the Credit Facility. The proceeds of the borrowed funds under the Credit Facility were deposited in an unencumbered account with a bank that is not a lender under either the LINN or Berry credit facility. Total borrowings, including outstanding letters of credit, under the Credit Facility are now $3.6 billion. The credit facility for Berry remains nearly fully utilized at approximately $900 million, including $250 million of restricted cash posted as collateral. As of February 2016, there was less than $1 million of available borrowing capacity under the credit facilities.

The maturity date for the LINN and Berry credit facilities, along with LINN’s outstanding $500 million term loan, is April 2019. LINN and Berry have unsecured senior note maturities ranging from 2019 through 2022.  In addition, LINN has senior secured second lien notes (“Second Lien Notes”) with a maturity date of December 2020. The next borrowing base redetermination is scheduled for April 2016. The LINN Credit Facility, term loan and Second Lien Notes are each subject to springing maturity, based on the maturity of any junior lien debt.

As of the date of delivery of the going concern audit opinion described above, LINN is currently in default under the Credit Facility. If LINN is unable to obtain a waiver or other suitable relief from the lenders under the Credit Facility prior to the expiration of the 30-day grace period, an event of default will result, and the lenders can elect to accelerate all outstanding indebtedness under the Credit Facility, which would be immediately due and payable. Acceleration of the indebtedness under the Credit Facility could, under certain circumstances, result in cross acceleration of the unsecured senior notes and certain of Berry’s indebtedness. Additionally, the indenture governing the Second Lien Notes required LINN to deliver certain mortgages by February 18, 2016, subject to a 45-day grace period. LINN has elected to exercise its 45-day grace period and, as a result, LINN is currently in default under the Second Lien Notes. If LINN does not deliver the mortgages within the 45-day grace period or is otherwise unable to obtain a waiver or other suitable relief from the holders of the Second Lien Notes prior to the expiration of the grace period, an event of default will result and if the trustee or noteholders holding at least 25 percent in the aggregate outstanding principal amount of the Second Lien Notes so elect would accelerate the Second Lien Notes causing them to be immediately due and payable. Further, the indentures governing certain of LINN’s and Berry’s senior notes required the respective companies to make interest payments on March 15, 2016, subject to a 30-day grace period. Each company has elected to exercise its respective 30-day grace period, and, as a result, both companies are currently in default under the indentures governing such senior notes. If the respective companies do not make the interest payments within the 30-day grace period or are otherwise unable to obtain a waiver or other suitable relief from the senior noteholders prior to the expiration of the grace period, an event of default will result and the noteholders could elect to accelerate such senior notes, causing them to be immediately due and payable, which may result in certain other cross defaults and cross accelerations.

Hedging Update

LINN has hedge agreements with respect to approximately 100 percent of the Company’s consolidated expected natural gas production through 2017 at average prices ranging from $4.48 to $5.00 per MMBtu. The Company does not currently hedge the portion of natural gas production used to economically offset natural gas consumption related to its heavy oil operations in California.

LINN has hedge agreements with respect to approximately 80 percent of the Company’s consolidated expected oil production in 2016 at an average price of approximately $90 per Bbl. Berry has no hedge agreements in place with respect to oil production.

LINN’s hedge book had an estimated net positive mark-to-market value of approximately $1.8 billion as of December 31, 2015.

Fourth Quarter 2015 Results

Production decreased 16 percent to 1,134 MMcfe/d for the fourth quarter 2015, compared to 1,358 MMcfe/d for the fourth quarter 2014. This decrease was primarily attributable to divestiture activities during the fourth quarter 2014 and reduced capital expenditures. Total revenues and other were approximately $647 million for the fourth quarter 2015, compared to $2.2 billion for the fourth quarter 2014, which includes losses related to non-cash changes in fair value of unsettled commodity derivatives of approximately $86 million and gains of approximately $1.2 billion, respectively.

Lease operating expenses for the fourth quarter 2015 were approximately $150 million, or $1.44 per Mcfe, compared to $235 million, or $1.88 per Mcfe, for the fourth quarter 2014. This 36 percent decrease was primarily due to cost savings initiatives, a decrease in steam costs and lower costs as a result of the properties sold during the fourth quarter 2014. Transportation expenses for the fourth quarter 2015 were approximately $55 million, or $0.53 per Mcfe, compared to $63 million, or $0.51 per Mcfe, for the fourth quarter 2014. This decrease was primarily due to properties sold during the fourth quarter of 2014. Taxes, other than income taxes, for the fourth quarter 2015 were approximately $24 million, or $0.23 per Mcfe, compared to $66 million, or $0.53 per Mcfe, for the fourth quarter 2014. This decrease was primarily due to lower ad valorem taxes attributable to the reduction in the overall valuation of wells based on pricing declines and final property assessments and lower severance taxes attributable to the decrease in commodity prices. General and administrative expenses for the fourth quarter 2015 were approximately $59 million, or $0.57 per Mcfe, compared to $72 million, or $0.57 per Mcfe, for the fourth quarter 2014, which includes approximately $7 million and $8 million, respectively, of non-cash unit-based compensation expenses. This 17 percent decrease was primarily due to lower acquisition related expenses and salaries and benefits related expenses, partially offset by higher expenses for professional services. Depreciation, depletion and amortization expenses for the fourth quarter 2015 were approximately $168 million, or $1.61 per Mcfe, compared to $241 million, or $1.93 per Mcfe, for the fourth quarter 2014.

For the fourth quarter 2015, the Company reported a net loss of approximately $2.5 billion, or $7.05 per unit, which includes non-cash impairment charges of approximately $3.0 billion, or $8.63 per unit, non-cash losses related to changes in fair value of unsettled commodity derivatives of approximately $83 million, or $0.24 per unit, and non-cash gains on extinguishment of debt of approximately $506 million, or $1.44 per unit. For the fourth quarter 2014, the Company reported a net loss of approximately $155 million, or $0.47 per unit, which includes non-cash impairment charges of approximately $1.7 billion, or $5.16 per unit, and non-cash gains related to changes in fair value of unsettled commodity derivatives of approximately $1.2 billion, or $3.70 per unit. The non-cash impairment charges for the fourth quarter 2015 were primarily due to lower commodity prices and the Company’s estimates of proved reserves. In the fourth quarter 2014, the non-cash impairment charges were due to a steep decline in commodity prices.

Full-Year 2015 Results

Production decreased two percent to 1,188 MMcfe/d for the year ended December 31, 2015, compared to 1,210 MMcfe/d for the year ended December 31, 2014. This decrease was primarily attributable to divestiture activities during 2014 and reduced capital expenditures.  Total revenues and other were approximately $2.9 billion for the year ended December 31, 2015, compared to $5.0 billion for the year ended December 31, 2014, which includes losses related to non-cash changes in fair value of unsettled commodity derivatives of approximately $159 million and $1.0 billion, respectively.

Lease operating expenses for 2015 were approximately $618 million, or $1.42 per Mcfe, compared to $805 million, or $1.82 per Mcfe, for 2014. This 23 percent decrease was primarily due to cost savings initiatives, a decrease in steam costs and lower costs as a result of the properties sold during the fourth quarter 2014, partially offset by costs associated with properties acquired during the third quarter 2014. Transportation expenses for 2015 were approximately $220 million, or $0.51 per Mcfe, compared to $207 million, or $0.47 per Mcfe, for 2014. This increase was primarily due to higher transportation costs associated with properties acquired in 2014, partially offset by lower costs as a result of properties sold during the fourth quarter of 2014. Taxes, other than income taxes, for 2015 were approximately $182 million, or $0.42 per Mcfe, compared to $267 million, or $0.61 per Mcfe, for 2014. This decrease was primarily attributable to lower severance taxes attributable to the decrease in commodity prices. General and administrative expenses for 2015 were approximately $297 million, or $0.68 per Mcfe, compared to $293 million, or $0.66 per Mcfe, for 2014, which includes approximately $47 million and $45 million, respectively, of non-cash unit-based compensation expenses. This one percent increase was primarily due to higher advisory fees related to the alliance agreements, partially offset by lower acquisition expenses. Depreciation, depletion and amortization expenses for 2015 were approximately $806 million, or $1.86 per Mcfe, compared to $1.1 billion, or $2.43 per Mcfe, for 2014.

For the year ended December 31, 2015, the Company reported a net loss of approximately $4.8 billion, or $13.87 per unit, which includes non-cash impairment charges of approximately $5.8 billion, or $16.93 per unit, non-cash losses related to changes in fair value of unsettled commodity derivatives of approximately $154 million, or $0.45 per unit, non-cash gains on extinguishment of debt of approximately $719 million, or $2.09 per unit, and gains on sale of assets and other of approximately $197 million, or $0.57 per unit.  For the year ended December 31, 2014, the Company reported a net loss of approximately $452 million, or $1.40 per unit, which includes non-cash impairment charges of approximately $2.3 billion, or $7.00 per unit, and non-cash gains related to changes in fair value of unsettled commodity derivatives of approximately $1.0 billion, or $3.13 per unit. The non-cash impairment charges for the year ended December 31, 2015, were primarily related to lower commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves. In 2014, the non-cash impairment charges include approximately $1.7 billion due to the steep decline in commodity prices during the fourth quarter of 2014 and approximately $603 million due to the divestiture of certain high valued unproved properties in the Midland Basin.

Supplemental information on the Company’s financial and operational results can be found under “Presentations” at www.linnenergy.com.

Reserves Update

As of December 31, 2015, the Company’s total proved reserves were estimated to be approximately 4.5 Tcfe, of which approximately 59 percent were natural gas, 26 percent were oil and 15 percent were NGL.  All proved reserves were classified as proved developed, with a total standardized measure of discounted future net cash flows of approximately $3.0 billion. The Company’s estimated reserves at year-end 2015 were based on the average first-day-of-the-month oil and natural gas prices for each month, which were $50.16 per Bbl and $2.59 per MMBtu, compared to $95.27 per Bbl and $4.35 per MMBtu, respectively, for 2014.

The decrease in estimated proved reserves for the year ended December 31, 2015, includes approximately 2,379 Bcfe of negative revisions of previous estimates, primarily due to 1,776 Bcfe of negative revisions due to lower commodity prices, 349 Bcfe of negative revisions due to uncertainty regarding the Company’s future commitment to capital and 302 Bcfe of negative revisions due to the SEC five-year development limitation on PUDs, partially offset by 48 Bcfe of positive revisions due to asset performance.

As a result of the uncertainty regarding the Company’s commitment to capital, LINN reclassified all of its proved undeveloped reserves (“PUDs”) to unproved as of December 31, 2015.

Proved Reserves Table (Bcfe)

Consolidated LINN Berry
Proved reserves at December 31, 2014 7,304 5,631 1,673
Revisions of previous estimates due to price (1,776 ) (1,347 )  (429 )
Revisions due to uncertainty regarding future commitment to capital (349 ) (259 )    (90 )
Revisions of previous estimates due to PUD SEC 5-year rule   (302 ) (238 )   (64 )
Performance revisions 48 (11 ) 59
Sales of minerals in place (50 ) (50 )
Extensions, discoveries and other additions   47 37 10
Production   (434 ) (328 )   (106 )
Proved reserves at December 31, 2015   4,488 3,435 1,053
Standardized measure of discounted future net cash flows (in millions)(1) $ 3,034 $ 2,039 $ 995

(1) Based on the average first-day-of-the-month oil and natural gas prices for each month, which were $50.16 per Bbl and $2.59 per MMBtu.

Potential Tax Liabilities

Unitholders of LINE are required to pay taxes on their share of LINE’s taxable income, including their share of ordinary income and capital gain upon dispositions of properties by LINE or cancellation of debt, even if they do not receive any cash distributions from LINE. For example, LINE’s 2015 senior notes exchanges and repurchases of outstanding senior notes at prices lower than face amount resulted, and any similar transactions in the future will result, in cancellation of debt income that will be allocated to LINE unitholders.

LinnCo is a limited liability company that has elected to be treated as a corporation for United States federal income tax purposes. LinnCo’s federal taxable income is subject to a corporate level tax.  A LinnCo shareholder is subject to income tax on taxable dividends received or on any gains from the holder’s sale of LinnCo shares. However, a LinnCo shareholder will not be required to include an allocated share of LinnCo’s income (including any cancellation of debt income), gains, losses, or deductions in computing the holder’s own taxable income.

Annual Report on Form 10‑K

LINN and LinnCo plan to file Annual Reports on Form 10-K for the year ended December 31, 2015, with the SEC on March 15, 2016.

Conference Call and Webcast

LINN will not be hosting an earnings conference call or webcast in connection with its fourth quarter and full-year 2015 results. Supplemental materials will be available in the Investor section of the company’s website at www.linnenergy.com.

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1 Comment

  1. waterwatcher says:

    Oops – hope no one is investing in this company. Looks like it is going away. Wonder who will be responsible for cleaning up the Barry Petroleum wells and well sites.

    Oklahoma is experiencing massive earthquake activity (see Time Magazine article) from oil drilling waste water injection wells, according to USGS and are apparently starting to do more regulation of the massive amounts of brine discharge into the ground that are “greasing” the fault lines. So Linn’s Tuttle field may be in for additional supervision and restrictions.

    Thank heavens the community was able to stop the brine injection wells here, although Newhall Land is still proposing two wells on its properties and I am told that the Gas Co. has injection wells for its Honor Rancho storage field.

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The Robert T. Brentnall Pawsibilities Foundation, a Santa Clarita-based nonprofit animal rescue organization (Tax ID# is 47-5634745), is asking the community to help a family with a litter of German shepherd puppies, by adopting one or donating funds to help care for them.
Animal Rescue Group Seeks Help for German Shepherd Puppies
CalArts School of Art faculty member Shirley Tse will represent Hong Kong at the 2019 Venice Biennale in Venice, Italy, happening now through November 2019.
CalArts’ Shirley Tse to Represent Hong Kong at Venice Biennale
University administrators are falling short in their responsibilities to swiftly hold accountable staff and faculty named in sexual violence complaints and align disciplinary policies with federal guidelines, according to a state audit released Thursday of three University of California campuses.
UCLA, 2 More UC Campuses Faulted for Sex Misconduct Process
The Academy of Motion Picture Arts and Sciences is proud to announce commitments from four additional industry partners – AMC Networks, Moving Picture Institute, Telsey + Company, and Xperi – to participate in Academy Gold, an entertainment industry-wide internship enhancement and mentorship program for students and young professionals from underrepresented communities.
Academy Launches Summer ‘Gold’ Diversity Internships
The Los Angeles County Board of Supervisors in their meeting Tuesday will consider a motion urging California to create an emblem program for licensed cannabis stores so consumers will know which stores are legal.
Supes Propose Statewide Cannabis Store Licensing Program
The JetHawks began the second half of the 2018 season with a win, beating Inland Empire, 7-5, at The Hangar Thursday night.
JetHawks Start Strong in Second Half, Beat IE 7-5
After four weeks of spirited voting, USA Today announced Friday that readers have voted Six Flags Magic Mountain the winner of the 2018 Best Theme Park contest.
USA Today: Six Flags Magic Mountain No. 1 Theme Park
The next meeting of the Los Angeles County Board of Supervisors is set for Tuesday, June 26, starting at 9:30 a.m.
June 26: LA County Board of Supervisors Meeting
The state of California has a list of more than 10,000 known individuals in illegal possession of firearms, but has not provided adequate resources for law enforcement to recover their weapons, Assemblyman Dante Acosta (R-Santa Clarita) said in a statement Friday.
After Firearms Raid, Acosta Calls for More Law Enforcement Funding
A voter-approved ballot measure aimed at reducing California’s prison population and ending racial disparities in the war on drugs has produced most of the cost-saving, equity-focused results it promised, with some exceptions, according to a study published Thursday.
Study: Prop. 47 Decreased Racial Disparities in Drug Arrests
A Santa Clarita Valley Sheriff's Station deputy reportedly clocked a Las Vegas woman driving 93 miles an hour near the Saugus Speedway and arrested her on charges of excessive speed and reckless driving late Wednesday night.
Nevada Woman Arrested for Speeding, Reckless Driving in Saugus
1972 - Vasquez Rocks added to National Register of Historic Places [list]
The ARTree still has openings for next week's Junior Arts Sampler and "I Made That!" pastel classes.
ARTree Summer Classes Still Available
The Santa Clarita Arts Commission will hold a study session, Monday, June 25, at 6:30 p.m.
June 25: Arts Commission Study Session
The California Enterprise Development Authority will hold a teleconference meeting, Thursday, June 28, 2018 at 10:30 a.m.
June 28: California Enterprise Development Authority Teleconference Meeting
The Santa Clarita City Council will hold a special meeting Tuesday, June 26, at 5:30 p.m.
June 26: Santa Clarita City Council Special Meeting
Firefighters are battling a brush fire at the Sunshine Canyon Landfill that started around 3:00 p.m. Thursday.
Firefighters Battling 1-2 Acre Fire Near Newhall Pass
Glenn Frankel and Keri Walsh have been named 2018 Academy Film Scholars by the Academy of Motion Picture Arts and Sciences.
Academy Honors 2018 Film Scholars
Join the Santa Clarita Valley Chamber of Commerce and Sweat Box Sauna Bar as they celebrate the opening of their new location.
June 27: Grand Opening Celebration Sweat Box Sauna Bar
Fresh Mustang connections to Major League Baseball didn't end with the draft earlier this month. Master's graduate David Sheaffer, who transferred before his final collegiate season to pursue an international MBA program, signed a free agent contract with the Seattle Mariners on June 10.
TMU Alum Signs with Seattle Mariners
There are spots still available on the Saugus Spartans Football program for kids between the ages of 6-8 years old.
Spots Still Open on Saugus Spartans Football Program
An already extremely tight inventory bumped into rising interest rates to further complicate home sales during May in the Santa Clarita Valley, which saw drops in home and condominium closed escrows compared to a year ago, the Southland Regional Association of Realtors reported Thursday.
SCV Home, Condo Sales Drop Amid Tight Inventory, Rising Interest Rates
Detectives from the Santa Clarita Valley Sheriff's Station are looking for a male suspect who stole a tip jar from a local coffee shop. Details below are from the Facebook page of the SCV Sheriff's Station:
Detectives Seek Public’s Help in Nabbing Tip Jar Thief
Adoption is a meaningful way for individuals and couples to fulfill their dream of parenting. There are approximately 64,000 children in foster care in California.
July 28: Children’s Bureau Foster Care, Adoption Information Meeting
The Los Angeles County Sheriff’s Department will be conducting a specialized Motorcycle Safety Enforcement Operation on Friday, June 22, in the city of Santa Clarita in an effort to lower deaths and injuries.
LASD to Conduct Specialized Motorcycle Safety Operation
LOS ANGELES – According to the South Coast Air Quality Management District, air quality will be unhealthy for all individuals in Santa Clarita Valley and for sensitive individuals in East San Gabriel Valley area tomorrow, Friday, June 22.
Air Quality Advisory Issued for SCV
1941 - Ernie Hickson buys out Trem Carr's interest in their Monogram movie ranch, renames it "Placeritos" (later called Melody). [story]
CalArts alumna and faculty member Brigette Barrager (BFA Film/Video 07) was awarded the Christopher Award for Distinguished Achievement for her illustration of "Pocket Full of Colors."
CalArts Faculty Brigette Barrager Wins Christopher Award
"Window Lace," the first exhibit by CalArts students to be presented at the Westfield Valencia Town Center Mall, is now open on the mall's first floor across from H&M and will be on display through the end of summer 2018.
CalArts Opens its First Art Exhibit at Westfield Valencia Mall
The Academy of Motion Picture Arts and Sciences today announced that Jennifer Todd has won the runoff election for the open Producers Branch seat on the 2018–19 Board of Governors.
Producer Jennifer Todd Voted to Academy Board of Governors