Photo credit: LINN Energy

Oil and gas MLP LINN Energy (NASDAQOTH:LINEQ), and by extension its affiliate LinnCo (UNKNOWN:LNCO.DL), reported a lot of numbers on Aug. 8. However, there are really just three numbers in particular that matter to LINN's investors, so let's take a closer look at them.

Distribution coverage ratio
LINN reported distributable cash flow per unit of $0.65 in the second quarter, which was less than last year's amount of $0.70. It's also below the company's quarterly distribution of $0.725, meaning that LINN's distribution coverage ratio was just 0.89 times, which is below the critical 1.0 times level. Further, it's just slightly better than last quarter's 0.88 times. The bottom line is that LINN is currently paying out more than it earns; its capital program hasn't produced as expected while the company has also been hit by historically low natural gas liquids prices.

LINN does expect that ratio to improve by the end of the year, and it is considering two scenarios. First, it sees the ratio hitting 0.95 times by the fourth quarter if it's unable to close its proposed acquisition for Berry Petroleum (UNKNOWN:UNKNOWN). However, if the deal does go through, LINN sees its coverage ratio in the fourth quarter rising all the way to 1.16 times. While LINN has endured a challenging year so far, it appears that its distribution should be safe even if it ends up abandoning its deal for Berry Petroleum because its coverage ratio should be close enough that it can grow its way above 1.0 next year.

Production growth
In the second quarter LINN was able to grow its average daily production to 780 MMcfe/d which is well ahead of the 630 MMcfe/d it was producing at this time last year, or a rise of 24%. By the end of the year LINN expects to produce about 850 MMcfe/d, which would be 8%-10% growth over last year. Unfortunately, that growth will be higher in natural gas content than the company had hoped as some of its oil-focused wells underperformed its expectations. That, along with its issues with natural gas liquids prices have affected its margins and cash flow this year.

This is again where LINN's plan to acquire the oil-rich Berry would pay big dividends. If the deal goes through, then LINN would end the year with production of about 1,095 MMcfe/d, however, because Berry is heavily weighted toward oil, that production would have a much greater impact on its bottom line. However, with or without Berry, LINN is growing its production, which is what investors want to see.

Oil growth
Over the past year LINN has been able to grow its oil production by 12%. However, the company has grown its natural gas production by 35% over that same time. That means that LINN's overall production mix has gone from an even balance between natural gas and liquids to one weighted toward natural gas, which was 55% of its total production last quarter. That's not exactly a trend investors want to see.

Looking ahead, if the deal for Berry does not close, LINN will end the year with natural gas at 54% of its average daily production. On the other hand, if it is able to close that deal, oil and natural gas liquids will actually be 54% of its production and natural gas will slip to 46%. Clearly, the Berry deal is an important and transformational one for the company.

Final Foolish thoughts
LINN produced just a fair quarter; the company hasn't been able to produce as much oil as it thought it would. Closing its deal for Berry would fix that in a hurry. However, even if the deal falls through LINN will be fine; it just will have to find another way to increase its exposure to higher-priced oil.