Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Linn Energy, LLC (NASDAQ:LINE)

Q3 2012 Earnings Call

October 25, 2012 11:00 am ET

Executives

Mark Ellis – Chairman, President & CEO

Kolja Rockov – CFO, EVP

Clay Jeansonne, VP – IR

Arden Walker – EVP & COO

Analysts

Kevin Smith – Raymond James

John Ragozzino – RBC Capital Markets

Dan Guffey – Stifel Nicolaus

Michael Peterson – MLV & Company

Bernard Colson – Global Hunter

James Jampel – HITE Hedge Asset Management, LLC

Ethan Bellamy – Robert W. Baird & Co.

Eric Anderson – Hearthford Financial

Gary Ruth – Ruth Asset Management Co.

Operator

Good morning ladies and gentlemen, and welcome to Linn Energy Third Quarter 2012 Earnings Conference Call. At this time all participants are in a listen-only mode, later we will conduct the question-and-answer session with instructions is following at that time. (Operator Instructions) And as a reminder this conference is being recorded.

Now, I’ll turn the conference over to Clay Jeansonne, Linn Energy’s Vice President of Investor Relations. Please begin.

Clay Jeansonne

Thank you for joining our third quarter 2012 earnings conference call. In a moment, I’ll introduce Mark Ellis, our Chairman, President, and Chief Executive Officer. But I first need to provide you with disclosure regarding forward-looking statements that will be made during this call.

The statements describing our beliefs, goals, plans, strategies, expectations, projections, forecasts, and assumptions are forward-looking statements. Please note that the company’s actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control. Additional information concerning certain risk factors relating to our business, prospects and results is available in the company’s filings with the SEC, including our Form 10-Q for quarter ended September 30th 2012, which will be filed today, and any other public filings and press releases.

Additionally, during the course of today’s discussion, management will refer to adjusted EBITDA as an important metric for evaluating the company’s performance. Please note that adjusted EBITDA is a non-GAAP financial measuring which is reconciled to the most directly comparable GAAP measure in the earnings press release issued this morning.

Supplemental financials and operational information, including the company’s statement of operations, selected balance sheet data and guidance table has been posted to Linn Energy’s website at www.linnenergy.com in the Investor Relations, under presentations. Following management’s prepared remarks, we’ll take your questions.

I’ll now turn the call over to Mark Ellis, Linn’s Chairman, President and CEO.

Mark Ellis

Thanks, Clay, and good morning. Joining us today in Houston are Kolja Rockov, Linn’s Executive Vice President and Chief Financial Officer, and Arden Walker, Linn’s Executive Vice President and Chief Operating Officer.

First, I’d like to thank our existing new holders for the confidence they have shown in the company since our IPO in 2006, and welcome our new shareholders of LinnCo. We appreciate the confidence and ongoing support of both groups of investors in Linn. Linn has always been a pioneer since its very beginning. We created the upstream MLP LLC structure and we’re the first to take that vision and strategy public in 2006.

We started the company knowing that the US is the most mature producing leading in the world. There are more producing wells in the US than the rest of the world combined. That is embarked upon the vision of consolidating material, oil and natural gas assets across the US and hedging the production to lock-in margin and create an attractive distribution.

We began trading with an enterprise value of $700 million and today have grown into a $15 billion company with approximately 1,100 employees as a result, of (indiscernible) acquisitions probably $10 billion. Assessments IPO we’ve also doing our distribution by 81% and generated with the total shareholder return of more than 250%. We believe these accomplishments are our testaments to our strategy, strong business model and our section of these qualities.

We believe the local IPO with the landmark transaction for the company, the reason behind the LinnCo was developed separately to turn the table on distribution into $10.99 cash dividend and significantly brought in our assets to capital. That business was successfully achieved with our loan for IPO on October 12.

We believe, that the game changer for the company, are to create some additional option for institutional and retail shareholders to invest in lands. We believe we still provide the company with greater access to capital which encouraged you to allow them to accelerate with acquisition growth strategy. We’ve already have reference study 2012 in closing over $2.8 billion and acquisition and joint venture agreements. We believe that LinnCo can provide us with the ability to capitalize and we anticipate with a very robust acquisition environment over the next 12 to 18 months.

Now let’s turn our attention to our operational results. We continue to believe strong results from the Granite Wash where the company currently operates $8 billion, today we have a 127 operated horizontal wells producing and 17 operated wells daily completing for a waiting completion. The company’s net horizontal Granite Wash production during the third quarter averaged approximately 193 million cubic feet equivalent per day.

During the third quarter, Linn drilled an additional nine operating horizontal Hogshooter wells with an average and initial production rate of 1,983 barrels day per oil, 534 barrels a day at NGLs and 3.4 million cubic feet of natural gas per well or over 3,000 barrels of equivalent per day. Today the company has drilled and completed 12 Hogshooter wells with an average initial production rate of 2,100 barrels per day of oil, 528 barrels per day of NGL and 3.4 million cubic feet per day of natural gas per well or over 3,200 barrels of equivalent per day.

As an indication of how highly economic for Hogshooter wells, our first three wells paid off in approximately 90 days, combined with our recent nine wells, Linn’s 12 Hogshooter wells have already produced a total of over 700,000 barrels of oil. We anticipate drilling an additional 11 Hogshooter wells in 2012, eight of which are currently drilling with results expected in the fourth quarter.

In addition, we planned to test the Hogshooter interval in the Mayfield area of Western Oklahoma, where we’ve had expanded acreage. Standing positive results from the Mayfield area, our inventories have all opportunities including the Hogshooter could potentially expand. We continue to lower lease operating expenses due to decreased work over costs, operational efficiency and lower service costs and all of the operating regions.

During the quarter, the company experienced a 29% reduction at LOE per Mcfe from the same period last year. Cost management programs will remain an important focus for our team. The revenue advantages to Linn’s size and scale that allows us to make significant entries into new basins. Our goal is to officially operate and enhance the drifting production of these mature properties due to implementation of work over’s, in completions and other production enhancement activities.

For example, we have already been able to conclude 80 optimization projects in the dividend field which resulted at approximately 3 million cubic feel equivalents per day of production at field. This was an example of how Linn’s technical expertise and experience with optimization of material oil and gas fields allows us to reduce drops and operate very efficiently.

At Linn, integration is a core competency, we believe we are differential to our peers and our ability to quickly integrate acquire asset and meaningfully into our culture and then continue to aggressively pursue additional accretive acquisitions. The integration of the dividend, lease taxes and salt creek acquisitions are on track and are almost complete.

Today we’re having a 120 employees associated with these transactions. We will serve operations in the Jonah Field on November 1st, 2012 and have already begun to identify optimization opportunities. And we move forward to adding the 37 employees in the Jonah Field to the Linn team.

While there are many elements of our dynamic strategy that set this apart is our ability to deliver both acquisitions and organic growth. During 2012, we have stepped approximately 3 billion acquiring primarily mature assets and its debt approximately $1 billion on organic growth which is resulted in prismatic production growth in 2012.

We entered the year producing approximately 425 million cubic feet equivalent per day and current production is more than 800 million cubic feet equivalent per day. The inventory set up includes even more consolidated more organic opportunities in many different zones, regions and commodity types. While we’re very optimistic about the acquisition environment, we were also very enthusiastic without our upcoming 2013 capital budget process. We will continue to optimize our capital programs to deliver the highest rates return possible, applying our capital dollars to the programs that maximize our cash flow. Moving forward to sharing the outcome of this process would be later this year.

Now I’m grateful for the unparallel work and dedication of our employees who manage approximately 11,000 operated wells across 10 states, without them we would not be where we are today.

I will now turn the call over to Clay.

Clay Jeansonne

I’d like to address the following topics in my discussion today. Third quarter results from times to the reminder of the year are recently completed LinnCo IPO and a very active acquisition market.

For the third quarter adjusted EBITDA is $402 million, our full unit basis are distributable cash flow with one dollar and a penny. We achieved a greater than expected distribution covered ratio of 1.4 times which was driven by higher volumes and lower costs.

In addition, stronger coverage was also impacted by the acquisition related cash flow, for the Jonah acquisition which includes six months of result in one quarter. Also the Jonah acquisition was funded entirely by the revolver in the quarter which was subsequently refinanced by the LinnCo IPO. These two factors explain most of the variance between Q3 and expected Q4 coverage.

Now I’ll turn the guidance for the fourth quarter 2012. At the mid point of our guidance range, we expect the adjusted EBITDA of approximately $382 million, distributable cash flow is estimated to be approximately $180 million which applied the distribution coverage ratio of approximately 1.08 times in the fourth quarter. At the midpoint and guidance for the full year 2012, we expect to generate adjusted EBITDA of approximately $1.4 billion, distributable cash flow is estimated to be $684 million which implies the distribution coverage ratio of approximately 1.14 times for the full year 2012.

Looking forward for 2013, we continue to believe our coverage ratios on base to approximately 1.2 times, obviously the potential accretive acquisitions should allow us to exceed the 1.2 coverage which creates the potential to continue to grow the distribution in an attractive way.

As many of you will aware, we’ve recently priced $1.3 billion initial public offering at LinnCo. The LinnCo IPO represents the landmark transaction not only for them but for the entire Energy sector. LinnCo’s $1.3 billion offering represents the largest E&P IPO, third largest Energy IPO and it’s the second largest IPO year-to-date in 2012. We believe LinnCo has the potential to be a game changer for Linn Energy as we expected to expand Linn investor base by attracting incremental institutions, tax exempt organizations and incremental retail investors including IRA accounts.

LinnCo for purpose is to (indiscernible) and shareholders who receive the cash dividend and Form 1099 instead of a distribution it’s Schedule K-1. This would allow investors that are invested to owning MLPs a better way to invest in Linn. LinnCo offered shareholders equivalent voting right and participation in any distribution growth which Linn Energy either of that currently would be.

I want to spend a few moments on taxation regarding LinnCo transaction. We estimate LinnCo to receive a tax sheet for many units except this 100% for at least the next three years which enables LinnCo issued any tax with the exception of the AMT tax. We project AMT tax for the next six quarters which includes the recently announced dividend to be $1.05 per quarter, on an annual basis with the reduction for the AMT tax with $0.06 per common share on the Linn Energy distribution or $2.84 annualized dividend to LinnCo shareholders.

LinnCo has the ability to carry forward extra sheet for future period to offset LinnCo’s future tax liabilities. At first, the capital budget and commodity pricings remain at approximately the current levels, we believe the tax shield of over 100% and the $1.05 AMT tax per share will not materially change on a go-forward basis. Through our steps Linn has always been on the forefront of creativity and innovation and our involvement in the creation of LinnCo is no exception, as we believe there is the revolutionary product to the MLP sector.

The outlook for the acquisition market continues to be stronger than ever, as we believe there is approximately $20 billion to $30 billion worth of assets coming to the market within the next 18 months. We have positioned the company’s role to take advantage of opportunities that may present themselves. We have a strong balance sheet, industry leading hedge book, increased asset for the capital markets and the cost of capital advantage. We believe these advantages position them that continue to rapidly acquire mature assets across the US and to distinguish us as the industry leader.

I will now turn the call over to the operator for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) First question is from Kevin Smith of Raymond James. Your line is open.

Kevin Smith – Raymond James

Congrats on the nice quarter and successful LinnCo offering.

Clay Jeansonne

Thanks Kevin.

Mark Ellis

Thanks Kevin.

Kevin Smith – Raymond James

Any update from the gathering processing on contracts in Texas panhandle?

Clay Jeansonne

We’re still in the process of finalizing the contracts, we have three or four parties that are working with and we will be able to give you a little bit more information on that next quarter. We still hope to be in a position to move more towards a better view for 2013 that’s our ultimate goal though.

Kevin Smith – Raymond James

Okay. Do you think you have – you think you have to wait until fourth quarter earnings release before we hear anything? Do you think you have any discussion by year-end?

Clay Jeansonne

Well potentially. Well, we normally do a little bit of information that goes out towards the end of December and we could be in position to let you have a little impact at that point.

Kevin Smith – Raymond James

Okay, perfect. And then where we are in industry best practices for Hogshooter play? I mean specifically do you feel do anything differently on their strong Hogshooter while they released this quarter?

Clay Jeansonne

Kevin, we’re seeing is there is a pretty liability of results there, some really, really good wells and we had still very well ourselves. I don’t know that we have enough information at this point to really say there is a lot of industry best practices at this point. I think most folks are doing similar types of completions, but at this point we’re probably still pretty early in the development phase out there. There is – I think we’ve identified about 24 completions. We actually have about half of them that is through the end of the third quarter. So not really enough data at this point to what I would call best practice – have the good – best practices in place.

Kevin Smith – Raymond James

Got you. And then lastly, does the 50 Hogshooter locations include DYCO area, are you closing anything there?

Clay Jeansonne

We haven’t opted any inventory in the DYCO area yet, we’ve kind of focused mostly in the core area of the Frye Ranch at this point and that’s where most of our inventory is. Should there be development in the DYCO area that could actually add some additional inventory for us.

Kevin Smith – Raymond James

Okay, great. Thanks folks.

Clay Jeansonne

Thanks, Kevin.

Operator

Thank you. Our next question is from John Ragozzino. Your line is open.

John Ragozzino – RBC Capital Markets

Can you hear me?

Operator

We can hear you Ragozzino.

Mark Ellis

Yeah.

John Ragozzino – RBC Capital Markets

Okay, I’m sorry. Mark, I think you have started to touch on a bit, but can you give us a little better feel for kind of the range of results that you’ve seen when you give that average Hogshooter well, is there maybe a best and a worst well that you can point to and maybe the average D&C cost that you’ve seen so far?

Mark Ellis

Yeah, I will ask Arden to comment on that.

Arden Walker Jr.

Yeah John, I think what we’re going to try to do is get results for maxes of wells. In the third quarter we came up with – we had nine wells that came on essentially within about a month of each other and so we’re going to try to lane towards just doing quarterly updates instead of putting one well kind of results out there and try to identify individual wells. We’re still in learning mode out there and I think you may see more individual results from other companies that only have one or two rigs run unit whereas we have more like eight rigs running. So there is a pretty wide range, but the way I look at is 2,100 well day averages for the 12 wells we drilled to date gives you a pretty good feel for quite a better than we’re modeling at 1,700. So we nevertheless like the results we’re getting.

John Ragozzino – RBC Capital Markets

And the average D&C?

Arden Walker Jr.

Drilling and Completion cost are running around $8.5 million.

John Ragozzino – RBC Capital Markets

All right, thanks. Kolja this one is for you on the offering, was there any incremental G&A expenses that you guess incurred either one time or recurring and since LinnCo is a separate energy, how does that show up and where does that flow through?

Kolja Rockov

Yeah. John, the cost of LinnCo are being burned entirely by LINN. So that will show up in the overall G&A line for LINN. But the cost are immaterial really is incremental legal cost and some of those other things that you incur when you take a company public, but I would say it’s on the order of magnitude of maybe $2 million and then overtime it’s probably better or less than that. So it’s not a material number.

John Ragozzino – RBC Capital Markets

All right, that’s helpful. And then has there been a specific strategy laid out in terms of the proportion of future equity capital raise that will be done via the traditional LP or should to the public or the LinCo Avenue?

Kolja Rockov

I think the nice thing about having both securities is that we have a lot of optionality. There is no set game plan so to speak. I think we’re just going to be exactly that opportunistic and watch how both of them trade. And a lot will depend on how much equity you need and how large the transaction is. So there is a lot of different factors to consider, but having both avenues clearly puts us in a much better position than not having it. So this is a new concept and we’re watching it just like you are and we’ll play it as the way see it at the time we needed.

John Ragozzino – RBC Capital Markets

All right. And then just one more, you use to point to a rule of thumb in terms of your target of accretion levels for acquisitions of about $0.05 per unit per $100 million spend. Are you still comfortable with that number based on the amount of activity that’s been done since we probably last touched on that?

Kolja Rockov

I think that’s a little bit of a data number you’re putting out there. I mean we’re probably more like $0.02 at this point in time. A lot of it’s a function of size clearly, but at $0.02 on $1 billion, you’re talking $0.20 an aggregate which is pretty big move. So there is still a lot of accretion out there to generate from acquisitions. And there is some variability, I mean some of the more mature assets maybe we go a little lower and then some of them there a little growth or we’ll be looking for higher accretion level. You have to adjust your bidding according to other factors, but we’re clustered around $0.02 on average I would say.

John Ragozzino – RBC Capital Markets

Well that’s precisely why I asked, thank you very much guys.

Mark Ellis

Yeah, thanks John.

Operator

Thank you. Your next question is from Dan Guffey of Stifel Nicolaus. Your line is open.

Dan Guffey – Stifel Nicolaus

Out of the 50 locations that you have in Hogshooter, can you talk about what spacing those are drilled on a potential for down spacing opportunities?

Clay Jeansonne

The spacing line now we have is three wells per section, probably not highly likely that will have incremental spacing wells to come in because of incremental spacing per section where we could have some additional inventories to identify incremental zone. So there is actually three or four intervals within the Hogshooter and if it were to be that you identify areas we have more than one target in a given location, you could have two wells or three wells in a specific place on the map as oppose to having more wells per section.

Dan Guffey – Stifel Nicolaus

Okay, thanks. And then I guess talking about the inventory, can you give how many wells you have in the liquids-rich Granite Wash the Britain Car formations?

Clay Jeansonne

How many producing wells or inventory?

Dan Guffey – Stifel Nicolaus

Sorry, inventory.

Clay Jeansonne

Yeah. We’ve identified a total inventory around 600 locations and that’s all different intervals within the Granite Wash section. So I haven’t really – I couldn’t break out the car and brit alone. I would say it’s probably – we drilled the most in those two sections at this point, so it’s probably 15% to 20% of that inventory at this point I would guess. I had to put a number on it.

Dan Guffey – Stifel Nicolaus

Okay, thanks. And then can you talk about how much NGO volume, total company NGO volume is currently directed to Conway and how much of that is coming from the Mid-Con then?

Clay Jeansonne

Were about 70% of our current stream goes to Conway next year as we move into some new contracts that we have as a result of the gathering system we put in place up there in the Granite Wash. We think we can actually flip that over it will be more like 70% Mont Belvieu toward the end of next year. It won’t all happen immediately, but we think that’s directionally there will be 70% Conway this year and probably like 70% Mont Belvieu next year, by the end of the year.

Dan Guffey – Stifel Nicolaus

Okay, great. In the Permian you got six rigs running in Martin and Howard Counties focusing primarily on Wolfberry development. As industry kind of de-risks other unconditional formations, do you guys feel comfortable enough in different areas across your acreage, people out in test horizontal well in 2013?

Clay Jeansonne

Yeah, we’re watching the industry activity really closely on the horizontals. We actually have one offset of pretty good size lease we have that we’re watching an early completion on right now. So as it gets de-risk, I think we’ll be very active at jumping on that horizontal location if it looks attractive to us. We really don’t care to be out there testing zones well before industry does, but to the extent they de-risk and we follow them up at some point in time. When it relates to the deployment of that technology, yeah, we can do that and just waiting to get our areas of operations.

Dan Guffey – Stifel Nicolaus

Okay great and one last one from me. Can you talk about the growth and capital investment you guys see there in South Creek during 2013?

Clay Jeansonne

Say that again, in terms of South Creek Capital?

Dan Guffey – Stifel Nicolaus

Yeah and the expected growth.

Clay Jeansonne

Yeah. Actually the model we put together when we did that acquisition, we put in the first $400 million of capital out there and it’s pretty leveled from 2012 to 2013. We kind of go through our expected capital by about the end of 2013, early 2014. So they are on a pretty aggressive stand mode between now and the end of next year and then after that it starts falling off.

Dan Guffey – Stifel Nicolaus

Okay, great. Great quarter guys, thanks, I appreciate it.

Clay Jeansonne

Thank you.

Mark Ellis

Thank you.

Operator

Thank you. Your next question is from Michael Peterson of MLV & Company. Your line is open. Hi Mr. Peterson, check your mute button.

Michael Peterson – MLV & Company

Yeah. Good morning gentlemen, sorry about that. My question this morning regard to the market reception of LinnCo. Thus far average daily volume is approximated 1 million shares per day and I mean my view the liquidity looks to be positive. I would be interested in your thoughts or expectations; anything you’re willing to share with regard to the initial read on the market as well as right now the pricing discount of LinnCo relative to LINN is approximating 6%. If you can speak to what’s your expectations where and how you think about that, that would be helpful.

Mark Ellis

Yeah, sure. In terms of your first comment, liquidity does look to be very good and I think that is the result of being an institutionally focused security which is what we wanted, but it’s – we priced a very large offering and we [indiscernible] [00:02:04] LINE 10 really well. I mean we feel like the underwriter is taking the over allotment option and the first day is – testimony to that is very well received with a very strong book. And I think a lot of people will tell you they have a strong book, but if they take the shield in the first day that I think is really the testimony that the strength of the after market support of the security.

With respect to the discount, it’s kind of hard to answer because part of the discount is being driven by the fact that LINN is straightening up. So it’s kind of a strange question which is – is it a discount or is it the existence of LinnCo pushing the value of LINN even higher, because it gives us greater access to capital and opens up a lot of different avenues for growth force. And this is a new security, so this is my opinion and I think that you will see that discount narrow, because it’s still a very, very attractive yield and a much larger market that has much lower yields in it. So it’s LinnCo I think gains even more acceptance in the broader market. I think you’ll see that this count narrow, but again I don’t have anything to point you to validate that I think.

Michael Peterson – MLV & Company

Sure. Now that’s helpful Clay, I appreciate that. Partly where I was headed with the question and it’s not necessarily answerable but that’s where I was interested in your expectations. As you think about future transactions and you look to the equity markets and you think about these two entities, is the discount worse to sustain itself in the 5% range. Would you then think about these two financing vehicles differently because of that cost differential?

Clay Jeansonne

I think you’d have to consider it. Yes, I think if you were trying to raise the smaller amount of equity and Linn with still out of premium which again I don’t think will persist, but just use your assumption let’s just say that it is. I think you would finance their first if there was a smaller transaction, but one of the nice things about LinnCo is that the retail markets MLPs has a limit to it in terms of how much you can raise in one shot.

So as you start to get into a larger deal, you’d obviously look at using them both, but at that point in time you’re talking about capturing something that you otherwise would be able to capture if you didn’t have LinnCo in existence. So I think on the margin we’ll obviously try to issue the securities that gives us the lowest cost to capital, but at the end of the day the big story line is much greater access as a whole.

Michael Peterson – MLV & Company

Great, helpful. Thanks and congratulations on a good quarter.

Clay Jeansonne

Thank you.

Mark Ellis

Thanks.

Operator

Thank you. And next question is from Bernie Colson of Global Hunter. The line is open.

Bernard Colson – Global Hunter

Quick question for you on leverage and where you guys stood. If you could give us a picture of where we stood on debt to EBITDA kind of before and after the LinnCo deal?

Clay Jeansonne

Yeah, sure. Before the deal obviously we’d completed almost $3 billion of acquisitions this year and really it’s not been in the market because we were working on the LinnCo transaction which shed us out. Post-LinnCo puts us back into the sort of normal range where we’re comfortable which is kind of 3 to 3.5 times debt to EBITDA before the fact we were north of 4. So it’s a pretty material move down into the comfort zone that we like.

Bernard Colson – Global Hunter

Okay, great. And I was hoping maybe you could just talk a little bit about distribution policy here given how high the coverage is this quarter and the fact that you may have completed so many acquisitions this year. Are we just on that kind of schedule for an increase every four quarters or if you add any color on that it’d be helpful. Thanks.

Clay Jeansonne

Well we’ve always said that, when we look at distributions we want our distribution rates to be meaningful. We talked about our target coverage ratio being around 1.2 times. And then when you look at that you think about distribution increase you try and look over the long-term in terms of what is sustainable in the business and so we did raise it at the end of the first quarter this year, 5% and like we said, we’ve always said we’re going to be on kind of that track record each and every year. And so we want to position ourselves for that with a strong 1.2 coverage.

Bernard Colson – Global Hunter

Okay, great. And then just last one from me, could you just – if you could breakdown the non-cash derivative loss for us into kind of what was hedges and what was referred fresh etc?

Clay Jeansonne

Yeah there actually is a reconciliation on the slide 13 or page 13, pardon me, of the supplemental information. And that just shows you that unrealized non-cash loss is $411 million, the real hedge revenue gain was about $109 million.

Bernard Colson – Global Hunter

Got you, okay. All right, yeah that’s it from me. Thank you.

Operator

Thank you. Your next question is from James Jampel of HITE. Your line is open.

James Jampel – HITE Hedge Asset Management, LLC

Hi guys. Just another follow-on question on the LinnCo deal, who in the end do you think ended up owning LinnCo. Do you think it was more energy investors or more dividend play investors?

Clay Jeansonne

Answer to that question, I mean, let’s just start at the very top. It was probably about 80%, 85% institutionally placed, so job number one of getting in institutional hands was checked as an accomplishment. Then within the group, how much was E&P and how much was dividend investors, it’s a good mix. And I think that there is still a fair amount of large dividend investors that are probably a little more risk averse to a new structure. They still seem to be very, very interested in following our story. So I think we got a good bit of both, but I think long-term the upside is getting more and more of that dividend investor into LinnCo and that’s what we’re going to work hard on. But the nice thing is we got in both and decent size and so we’re very pleased with that.

James Jampel – HITE Hedge Asset Management, LLC

Okay, thank you.

Clay Jeansonne

Thank you.

Operator

Thank you. And next question is from Ethan Bellamy of Baird. Your line is open.

Ethan Bellamy – Robert W. Baird & Co.

Hey guys. Do you have any acreage that might be perspective for continental resources scoop play that they talked about?

Clay Jeansonne

Ethan we actually do have a fairly decent acreage position in the southern part of Oklahoma which is the area that continental highlighted I think their scoop play. We have this, you may or may not know, a couple of three different fairly large wire floods in that area. We’ve been watching the activity in this play for a while and we’re in the process of trying to understand a little bit more of depth restrictions and things like that before you really talk about acreage in the play itself. But we’re definitely, when you’re watching activity out there and there appears to be some areas that appear to be very gassy and after some it appeared to be pretty oily. So we’ll be looking at that pretty closely in before we go out there and start pursued anything.

Ethan Bellamy – Robert W. Baird & Co.

Is there anything else in the portfolio that we might be talking about, have a rate say two or three quarters from now?

Clay Jeansonne

Well I mean we actually have some acreage in the Mississippi Lime Oil Play in Northern part of Oklahoma and you still hear several people talk about that. Our acreage tends to be a bit scattered there, but we do have a fair amount of – a couple of pretty good blocks of acreage there that they’re all watching and waiting for the right time to kind of pursue that.

The horizontals that people talk about out in the Permian Basin, you’ve already heard a couple of questions this morning on the horizontals in the Wolfcamp as well the Cline shale. I think those are plays that we’ll definitely keep in our eyes on and watching activities and we’ll see what comes from those, but I think we do that acreage in the right places is just we’d like to see some development before we jump in there ourselves.

Ethan Bellamy – Robert W. Baird & Co.

Okay. Kolja, you definitely probably the most creative CFO in the MLP space and I figure if anybody can figure out how to hedge NGLs effectively as you, any progress on that front? Is there any progress and risk management around NGLs for the industry that you guess?

Kolja Rockov

First of all, thanks for calling me out here in front of Mark Ellis. Good chuckle on that. We continue to work on it. I can’t tell you there is a magic solution to that. It really is – you can hedge NGLs, it’s not that you can’t hedge them. The problem is the shape and the curve in what you’re economically, so you have to have both things present for to be compelling for us to move forward. But clearly we’re continuing to watch that market carefully and hopefully the curve shapes into a place where it makes it more economically viable to do so.

Ethan Bellamy – Robert W. Baird & Co.

All right. Thank you, good luck.

Kolja Rockov

Yeah thanks.

Clay Jeansonne

Thanks Ethan.

Operator

Thank you. Next question is from Eric Anderson of Hearthford Financial. Your line is open.

Eric Anderson – Hearthford Financial

Yes, good morning. Congratulations on another terrific quarter. Most of my questions have been answered, but I wonder if I could just ask you a follow-up a little bit on your comments on possibly moving the Hogshooter activity over into Oklahoma. Specifically on what I’m interested in knowing if you kind of talk about it is, what kind of oil controls do you have from old vertical wells in the Mayfield and possibly the Beckham counties and compare that to what you’ve seen where you’ve been drilling currently?

Clay Jeansonne

Yeah, Eric, I’m going to go ahead and expand that a little bit. We have a really good acreage position in Mayfield area which is just across Eastward from the Texas Panhandle into the Oklahoma area. And we actually have already spud our first Hogshooter well in the Mayfield, hope to have some results late this year and probably be towards the end of December before we get that well, first well completed. But that’s going to be pretty useful for us in order to kind of highlight our inventory potential in that area.

You like the Hogshooter there we see some good indications on logs. There are also two or three additional oil inventory targets that we’re going to look at over there as well. So stay tuned on the half you got to follow this sometime next year before we get some of those tested, but given that we have such a large acreage position, we’re definitely going to be moving in that direction to test some of our oil inventory.

Eric Anderson – Hearthford Financial

Okay, fair enough. I appreciate it, thank you.

Kolja Rockov

Thanks Eric.

Operator

(Operator Instructions) The next question comes from Gary Ruth of Ruth Asset Management. Your line is open.

Gary Ruth – Ruth Asset Management Co.

Just could go through, based on capital spending this year, the acquired wells this year and the mature properties break out the production and the cash flows from each of those three segments?

Kolja Rockov

Yeah I really don’t have that kind of detail available. We can probably get you that if you can get with…

Gary Ruth – Ruth Asset Management Co.

Okay, I will get – I’ll give you a call offline.

Clay Jeansonne

Yeah if you call me at 281-840-4093 we can get some of that information for you.

Gary Ruth – Ruth Asset Management Co.

Perfect, okay. Thanks.

Operator

Thank you. This ends the Q&A portion of today’s conference. I’d like to turn the call over to Mr. Mark Ellis for closing remarks.

Mark Ellis

Well thanks everyone for your participation this morning and that concludes our call.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Linn Energy's CEO Discusses Q3 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts