Why These 3 Energy Stocks

Plunged 10% This Week

Source: LINN Energy LLC

It was a another mixed week for energy stocks. While several

enjoyed solid gains, others fell on hard times.

Here’s a closer look at three companies that really had a

tough week. Photo credit: TaxRebate.org.uk

What:

Units of LINN Energy (NASDAQ: LINE) dropped just more than 10% this week.

So What:

Key driver: LINN Energy announced a public offering of 16 million units

Offering is expected to raise $181 million

That cash will be used to reduce its debt

Now What:

LINN used its credit facility to buy back $184 million of its bonds on the open market for $165 million

It’s now issuing equity to pay down its credit facility

Takeaway: Investors don’t like the debt-for-equity swap as it is viewed as a sign of weakness

What:

Shares of the upstream MLP Atlas Resource Partners (NYSE: ARP) declined 11.5% this week.

So What:

Key driver: Atlas Resource Partners announced that it was issuing 6.5 million common units Raised a total of $49.5

million Plans to use $35.5 million to

buy natural gas properties from its parent Atlas Energy (NYSE: ATLS)

Balance of cash raised to be used to pay down its credit facility

Now What:

Deal is expected to be accretive to Atlas Resource Partners’ cash flow per unit

Company also bolstered its balance sheet by raising additional equity to pay down some of its credit facility

Takeaway: Despite the positives of the deal, investors weren’t thrilled as these are natural gas assets and really don’t move the needle for the company

What:

Shares of coal producer Peabody Energy (NYSE: BTU) burned investors this week as its stock sank 12.6%.

So What:

Key driver: Plunging bond prices

Bloomberg reported on May 19 that Peabody Energy’s bonds, just issued two months ago, are already down 18%

Now What:

Peabody issued $1 billion in 10% bonds to bolster its cash position to weather the storm in the coal market

However, the continued weakening in the coal market has weakened Peabody’s financial outlook

Takeaway: Peabody is trying to stay afloat, but the rapid descent of its recent bond offering doesn’t bode well for its future

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