Struggling Linn Energy will explore alternatives, including filing for bankruptcy, to shore up its finances while the oil crash shows few signs of letting up.
Linn, which borrowed billions of dollars to expand during the height of the shale oil boom, saw its stock value sink below $1 a unit for the first time in January. In a statement Thursday, Linn Chairman, President and CEO Mark Ellis said Linn is trying to cut costs amid the difficult price environment.
“Given commodity pricing pressure and the impact that market challenges are expected to have on our industry and the long-term financial outlook of our company, we believe it is prudent to explore opportunities to strengthen our balance sheet and ensure we have adequate financial flexibility to manage through prolonged commodity price headwinds,” Ellis said.
Linn will continue operating normally for now, but the company hired Bermuda-based financial advisory firm Lazard and Chicago-based law firm Kirkland & Ellis to complete a strategic review of its option.
Ellis declined requests for comment. Linn has not yet set a year-end financial earnings announcement date.
Linn operates as an exploration and production master-limited partnership, a tax-avoiding corporate structure that acts as a publicly traded entity distributing most of its income to investors, called unit holders, in payments similar to stock dividends. MLPs are most popular with pipeline companies, but Linn is one of the few oil-and-gas producing MLPs.
As crude prices and the revenue from selling that crude fell, Linn opted to eliminate its monthly distributions to investors in October.
Linn traded at more than $40 a unit in 2012 and over $30 as recently September 2014 before oil prices began plummeting. Linn sunk below $1 a unit in January and closed Thursday at $1.24.
Kevin Kaiser, an analyst with Connecticut-based Hedgeye Risk Management research firm, said he believe the announcement means Linn could likely file for bankruptcy protection soon. Such a move was expected, he said, but Linn’s announcement came sooner than anticipated.
Kaiser said Linn used to have excessive distribution payments and the MLP took on far too much debt before the oil crash occurred.