Leon Cooperman Optimistic on Linn Energy, Shares Jump

Leon Cooperman Optimistic on Linn Energy, Shares Jump
Leon Cooperman photo (CC BY-ND 2.0) Insider Monkey

Leon Cooperman, chairman and CEO of Omega Advisors, said his firm is comfortable with its investments in Linn Energy LLC (NASDAQ:LINE).  His statement drove the stock price of the energy company higher by more than 4 percent to $32.98 per share on Wednesday.

Leon Cooperman Optimistic on Linn Energy, Shares Jump

In his June 17 letter, Leon Cooperman emphasized that Omega Advisors is confident about the professionalism and integrity of the management of Linn Energy LLC (NASDAQ:LINE), and the hedge fund is optimistic about the future growth and financial performance of the energy company.

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Leon Cooperman’s opinion regarding Linn Energy LLC (NASDAQ:LINE) is in contrast with the perception of the media and various independent research firms that the energy company is unlikely to support a high-yielding dividend, and the value of its stock is only worth 50 percent of its current price.

During the first quarter of 2013, Linn Energy LLC (NASDAQ:LINE) reported an adjusted EBITDA of $356 million and $221.8 million net loss or $0.96 per share. In terms of non-GAAP financial measure, the energy company said its adjusted net income was $37 million or $0.16 per share. The board of directors of Linn Energy approved a quarterly cash dividend of $0.725 per share, and announced a stock merger between its subsidiary, LinnCo LLC (NASDAQ:LNCO) and Berry Petroleum Company (NYSE:BRY).

Barron’s Describes Linn As ‘Most Overpriced Producer’

In May, Andrew Barry of Barron’s described Linn Energy  LLC (NASDAQ:LINE) as the “country’s most overpriced large energy producer.” According to him, the energy company used “aggressive accounting to prettify its financial statements, and serial acquisitions to prop its reserves” for years, but it seems that its strategies are no longer effective.

Barry pointed out that Linn Energy failed to generate sufficient cash to cover its distribution in the first quarter even with its generous measure of distributable cash flow (only $0.64 per unit in Q1). Barry believed that its distributable cash flow is overstated, and it has a bigger problem because its energy production flattened despite increasing capital expenditures.

Leon Cooperman: Omega Advisors Moving Forward to Support Stock Merger

Meanwhile, in an interview with CNBC on Wednesday, Leon Cooperman emphasized that Omega Advisors did its homework on Linn Energy LLC (NASDAQ:LINE), and stated that Martin H. Young, CEO of Berry Petroleum Company (NYSE:BRY), is committed to the proposed stock merger agreement with LinnCo LLC (NASDAQ:LNCO).

In addition, Leon Cooperman said he is not concerned with how Linn Energy accounts for its existing hedging program to reduce its exposure to the volatility of energy price. He estimated that the net asset value of the energy company is approximately $40 per share, higher than its current price.

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