Strategy
LINN Energy’s primary business objective is to provide stability and growth of distributions for the long-term benefit of its unitholders. The Company’s business strategy is comprised of three key elements.
Grow Through Acquisitions of Long-Life, High-Quality Properties
LINN Energy's acquisition program targets oil and natural gas properties that offer long-life, high-quality production with relatively predictable decline curves and low-risk development opportunities. The Company evaluates acquisitions based on decline profile, reserve life, operational efficiency, field cash flow and development costs. As part of this strategy, the Company continually seeks to optimize its asset portfolio, including divestitures of non-core assets. This allows the Company to redeploy capital into low-risk, long-life and low-decline assets that are better suited to its business strategy.
Organically Grow Reserves and Production
LINN Energy maintains a large inventory of drilling and optimization projects to achieve organic growth from its capital development program. The Company seeks to operate its assets, so it can develop drilling programs and optimization projects that not only replace production, but add value through reserve growth and production growth. The development program focuses on low-risk, repeatable drilling opportunities to maintain and/or grow cash flow. Many of the wells are completed in multiple producing zones with commingled production and long economic lives. The number, types and location of wells drilled varies depending on the Company's capital budget, the cost of each well, anticipated production and estimated recoverable reserves.
Reduce Cash Flow Volatility Through
Commodity Price and Interest Rate Hedging
LINN Energy has attractive commodity hedge positions in place to provide long-term cash flow predictability to pay distributions and manage its business. The Company hedges a significant portion of its forecasted production to reduce exposure to fluctuations in the prices of oil and natural gas. By removing a significant portion of the price volatility associated with future production, the Company expects to mitigate, but not eliminate, the potential effects of declining commodity prices on cash flows from operations for those periods. These transactions are in the form of swap contracts, collars and put options.
