BP plc (ADR) (BP), Linn Energy LLC (LINE): What’s This Stock Worth?

LINN’s third-party advisor’s analysis isn’t quite as high as is LINN’s internal analysis. The third-party came up with a value of $37.34-$51.15 a unit. The difference here is that its valuation factors in current forward strip pricing as opposed to Linn Energy LLC (NASDAQ:LINE)’s assumption of higher gas prices by 2018. When you consider the volatility in the price of gas, caution isn’t a bad idea.

Given that valuations are more art than science, the key takeaway here is that there is the potential for substantial future value to be realized at Linn Energy LLC (NASDAQ:LINE). That’s on a baseline that assumes that the company never makes another acquisition. I think it’s safe to say that LINN won’t stop acquiring assets anytime soon, which could add significant future value. This is the company that spent more than $2.2 billion raiding BP for assets last year and along with its affiliate LinnCo LLC (NASDAQ:LNCO) has already announced the $4.3 billion Berry Petroleum deal.

At worst, LINN is probably fairly valued in the mid- to upper-$30 range per unit. Depending on how optimistic you want to be, the upside from there could be substantial. One thing is sure, you can feel fairly confident that an investment in LINN should provide an annual return that’s above its current distribution of 7.7%.

The article What’s LINN Energy Worth? originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of LINN Energy, LLC and LinnCo, LLC. The Motley Fool has no position in any of the stocks mentioned.

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