Linn Energy LLC (LINE) is a Buy After Berry (BRY)’s Acquisition

A Relatively Cheap Price

Berry Petroleum is an oil/gas company with around 275 MMBOE, of which around 70% was oil. In the past four years, Berry has been growing its cash flow per share consistently, from $4 in 2009 to nearly $10 in 2012. In 2012, Berry has focused its capital investment of $600 – $650 million in three main oil basins: Utah (25% of the total capital investment), California (33%) and the Permian (45%). Over the past 12 months, Berry generated around $508 million in EBITDA. Thus, the deal values Berry at around 7.4 times EV/EBITDA. As Linn Energy is currently trading at 10 times EV/EBITDA, a deal valuation of 7.4x Berry’s EV/EBITDA is relatively cheap. In addition, Berry’s acquisition would increase Linn Energy’s proved reserves by nearly 35%.

Foolish Bottom Line

Berry Petroleum seems to be quite a sweet deal for Linn Energy. After the deal, Linn Energy would have about 1.75 billion BOE in total proved reserves. Linn’s share price will be moving upwards in the coming months due to the increase in the proved reserves, increasing EBITDA, and increasing unit distributions.

The article Linn Energy is a Buy After Berry’s Acquisition originally appeared on Fool.com and is written by Anh HOANG.

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