Citi: Linn Energy must work to firm distribution sustainability, reduce leverage

|About: Linn Energy, LLC (LINEQ)|By:, SA News Editor

Last week, Linn Energy (LINE) reported Q1 earnings that were mostly uneventful, and Citigroup’s Faisel Khan and Vikram Bagri maintain their Neutral stance on the shares.

The Citi duo says LINE’s balance sheet is stretched with expected 2014 debt/EBITDA of 4.4x, thus LINE will focus on reducing leverage, improving coverage and lowering the overall decline of its asset base through Permian asset sales and accretive deals; management needs to execute well on all fronts to improve distribution sustainability and reduce leverage to a more manageable level.

Based on recent Permian transactions, Citi estimates LINE/LNCO could acquire ~$2B worth of mature producing properties in exchange for its acreage on sale.