Linn Energy Inc (OTCMKTS:LNGG) Too Cheap To Ignore

Are you interested in making investments in medium size companies, which are undervalued by the market? Do you also appreciate when the Board of Directors does something to push up the share price? If yes, then you will enjoy the following name, Linn Energy Inc (OTCMKTS:LNGG).Linn has a $2.5 billion market capitalization and has been for a while restructuring, reducing debt, and selling assets of its petroleum and natural gas business to push up the share price. Not happy with the results, the Board of Directors also noted the commencement of a share purchase agreement that is at the moment increasing the demand for the shares and should theoretically make the price increase. On the top of it, the company still seems undervalued. In this article, we will explain you the financial situation of the company and assess all the measures taken by the management.Have a look at the price action.SourceLinn EnergyLinn Energy, Inc. is a newly formed Delaware corporation, founded on February 14, 2017. It is a company that emerged from the bankruptcy of its predecessor; Linn Energy, LLC. Prior to the reorganization, it was a master limited partnership focused on the acquisition and development of a growing portfolio of long-life oil and natural gas assets.The new focus, as established in the annual report, is "on accelerating the development of its core SCOOP/STACK/Merge acreage in western Oklahoma, along with additional emerging stacked pay horizontal opportunities in the Mid-Continent, Rockies and TexLa regions". Let's check the most important part i.e. the number of productive wells owned and the exploration projects. This is from the annual report:

Natural Gas Wells

Oil Wells

Total Wells

Gross

Net

Gross

Net

Gross

Net

Operated ⁽¹⁾

9,030

8,012

4,363

4,039

13,393

12,051

Nonoperated ⁽²⁾

7,065

2,299

2,700

308

9,765

2,607

16,095

10,311

7,063

4,347

23,158

14,658

SourceAdditionally, these are the drilling locations:

Total ⁽¹⁾

Proved undeveloped

119

Other locations

5,096

Total drilling locations

5,215

Leasehold interests – net acres (in thousands)

2,640

SourceWe have seen before bankrupt companies emerge from reorganization without assets because debt holders take everything for themselves. This did not happen with LNGG. The balance sheet at this point in time is quite solid, and the financial performance is sound. Let us note what other investment journalists noted before. Market participants will appreciate the following bullish articles:

• Linn Energy is a Fascinating Prospect (Seeking Alpha)
• Linn Energy eliminates its debt (Seeking Alpha)
• Capitalcube on Linn - Value Analysis

Recent Developments and market reactionThe most interesting announcement is the sale of assets that the company is executing even after emerging from bankruptcy court. On June 7, 2017, it announced the sale of 2,000 net acres in the Brea-Olinda Field to an undisclosed buyer. Additionally, on June 1, 2017, the company signed a deal to sell Wyoming assets to Denver-based Jonah Energy LLC for a total contribution of $581.5 million. Furthermore, it obtained $71.5 million for the sale of other working interests in the Salt Creek Field to Denbury Resources Inc.What does the sale of assets mean for the company?Sale of unproductive assets usually bring cash to the company, which is appreciated by market participants, when the price paid is fair. In our opinion, it is being celebrated by the market. The company announced that it would be trading on the OTC Markets on April 10, 2017 and the share price flew on the recent announcements.Share Repurchase ProgramIt was also announced that the company would be buying back shares to increase the share price. The Board knows very well that it has a problem, as the share price remains undervalued. In our opinion, the market is undervaluing the company. Hence, the directors decided to repurchase shares. It was announced on June 1, 2017, but so far the share price has not reacted to it. But, it may do so in the near future. These are the details:

"The Board has authorized an initial share repurchase program of up to $75 million of the Company’s outstanding shares of Class A Common Stock (“shares”). The Company may purchase shares from time to time on the open market or in negotiated purchases. The timing and amounts of any such repurchases of shares will be at the discretion of management and the Board, subject to market conditions and certain other factors, and will be in accordance with applicable securities laws and other legal requirements, including restrictions contained in the Company’s Revolving Credit Agreement." Source

The balance sheet and conclusionHave a look at the most recent balance sheet reported in the last quarter. Traders only looking at the annual report will not be able to see that the company eliminated a large amount of debt. Additionally, they will fail to recognize that the shares are trading at just 1.27x times book value. Have a look:Period Ending3/31/201712/31/20169/30/20166/30/2016Current AssetsCash And Cash Equivalents82,838694,857800,507774,645Short Term Investments----Net Receivables181,034198,064213,108202,597Inventory----Other Current Assets93,411107,613122,539109,079Total Current Assets357,2831,000,5341,136,1541,086,321Long Term Investments8,9608,960205,204204,828Property Plant and Equipment2,630,2963,645,3396,026,3036,154,637Goodwill----Intangible Assets----Accumulated Amortization----Other Assets23,35214,71835,28731,388Deferred Long Term Asset Charges624,704624,704624,704624,704Total Assets3,644,5954,660,5917,402,9487,477,174Current LiabilitiesAccounts Payable382,989321,381409,302395,612Short/Current Long Term Debt46,8262,020,2372,830,6242,814,103Other Current Liabilities----Total Current Liabilities429,8152,341,6183,239,9263,209,715Long Term Debt805,625805,625805,625805,625Other Liabilities350,9814,704,6125,744,1825,657,330Deferred Long Term Liability Charges-11,3491,1991,199Minority Interest----Negative Goodwill----Total Liabilities1,586,4217,057,5798,985,3078,867,045SourceIn conclusion, it seems that many investment writers agree on the fact that the company is very undervalued. In our opinion, once more market participants have the opportunity of checking the balance sheet, the share price may go to more reasonable levels. In addition, the sale of assets, the consequent increase in cash, and the share repurchase agreement should also help. To sum up, shares presently look undervalued and present a discount entry opportunity.We will be updating our subscribers as soon as we know more. For the latest updates on LNGG, sign up below!Disclosure: We have no position in LNGG and have not been compensated for this article.