There are always challenges when an investor relations specialist is representing an E&P company to the world. But the task is especially tricky when the commodities market around you is collapsing, the company's production profile is changing, and the very nature of the investor base is also changing dramatically, all at the same time.

"When I joined, it was a very dramatic time," says Clay Jeansonne of his start as vice president of investor relations at Linn Energy LLC, three and a half years ago. "The economy was in a tailspin, and oil and natural gas prices collapsed."

At the time Jeansonne took the job with the Houston master limited partnership, he was exiting the IR position at Pogo Producing Co., which had just been acquired by Plains Exploration & Production Co.

“We are providing income to individuals who we know, and that makes us work even harder,” says Clay Jeansonne, vice president of investor relations, Linn Energy LLC.

Jeansonne began his career in investor relations at Louisiana Land & Exploration Co., under then-IR director Al Petrie, who is still an IR consultant to energy companies in New Orleans. (Burlington Resources later absorbed LL&E; before, Burlington itself was acquired by ConocoPhillips in 2006.)

"Al impressed upon me the importance of treating every investor the same and ensuring every investor has equal access to information."

When Jeansonne arrived at Linn Energy in 2007, it was a much smaller company than it is today. Jeansonne credits its rapid growth to executive chairman Mike Linn, president and chief executive officer Mark Ellis and executive vice president and chief financial officer Kolja Rockov, who made the decision to acquire $2 billion in assets from Dominion Resources in 2007. This deal helped to catapult the company to its current position as the largest upstream MLP. To make the acquisition, the company relied on institutional investors for $1.5 billion in private-equity placements, changing the composition of the investor base to approximately 85% institutional.

But that change turned out to have its good and bad aspects. "During the downturn, many institutions were forced to sell. They were getting margin calls that depressed our unit price, which dropped to $12," says Jeansonne. "Retail investors called continuously, asking if their distribution was safe. We had to spend a lot of time answering questions and addressing their concerns. That created a once-in-a-lifetime opportunity for retail investors to outmaneuver the institutions."

And outmaneuver they did—the company is now 85% held by retail investors. Not only is the investor base quite different, the company is drastically larger as well.

For his work in explaining the company's rapid growth profile, while managing new relationships due to the change in its investor base, Jeansonne wins Oil and Gas Investor's Excellence Award for Best IR, for the year 2010.

Blue Ocean IR

The result of the financial crisis was a shift in investor dynamics. Linn needed to retool to focus on retail investors, as well as brokerage firms. "That required educating brokers about the story, which pays off when they need to make a quick decision like investing in our overnight equity offerings," says Jeansonne.

There have been challenges in making the shift to a predominately retail investor base. The primary hurdle is reaching those investors.

Linn has completed more than $6 billion in acquisitions since its inception, via 47 separate transactions.

"These are people with TD Ameritrade or Scottrade accounts who get most of their information online. There is not a very effective way to communicate with them, because they don't get institutional research. Instead, their information comes from press releases, our website and message boards." That lack of access led Jeansonne to design a new campaign specifically to engage the market interested in a distribution-paying MLP.

"We do town-hall-style events. We invite people to a meal or coffee, where they hear the story from me and either the CEO or CFO. The cities we target are places like San Francisco, Los Angeles, Fort Lauderdale and, of course, New York and Houston, where we have a large concentration of unitholders. Cities like Phoenix that have a sizeable retiree population that's receptive to income-producing MLP units are good places to go as well."

Jeansonne crafted the company's communication for the investors he wanted to reach: individuals overlooked by traditional methods.

"I had to sit back and ask myself how to reach those people. Why couldn't I identify them and give them something? I brought my CEO to the first town hall. I was nervous only crickets would be there. Instead, we had 150 people."

Jeansonne says the process, the interaction and some thoughtfully selected Linn logo giveaways have led to tremendous feedback. He believes the company's accessibility sets Linn apart from most publicly traded entities. The Linn team created an environment where individual investors can interact directly with senior management—a relationship typically reserved only for institutional investors.

"It's hard to give the same access to the individual investor, but I believe they should have it," says Jeansonne.

Besides aiming for a level playing field, Jeansonne is also motivated by the wish to place units with stable holders. "If we put units into a traditional retail account, they will be held. That reduces volatility," he says.

Show on the road

Jeansonne has to get out of the office and stay on the road if he wants to reach new investors, and the travel required is intense. Last year he conducted 200 one-on-ones, 30 conferences between equity and debt, and six town-hall meetings. To leverage management's time, the team meets with brokers during trips that include retail town halls, which he began only last year.

"I'm on the road almost every week," he says, having returned to Houston after meeting with two brokerage offices and attending a large bank conference. His approach with brokers is to meet with them frequently, so they are always up to date on the Linn story.

Now he is experimenting with new media tools and new locations to reach even more people. The IR team is reaching out to places where it hasn't spent much time in the past, such as the Midwest and Pacific Northwest.

"We are branching out to reach the underserved population. To do that, we are now trying more cost-effective tools like Twitter and Facebook."

Jeansonne credits his management team for fostering an entrepreneurial spirit and giving his team the freedom to try strategies other IR teams might not attempt. Now he is seeing other MLPs begin to try some of Linn's initiatives. But even with the example having been set, not every company can replicate Linn's success, he notes.

"You have to have a great staff. Responding to 30 e-mails and 20 calls a day, just on retail, takes specialization." The aim is to get back to every retail investor, and the feedback indicates the plan is working. That input is truly encouraging, he says.

"We are providing income to individuals who we know, and that makes us work even harder."

Jeansonne and his team are saving time and money while increasing transparency. Although he was hesitant to de-emphasize hard-copy annual reports, the fast-moving pace of the company was outdating the printed annual report even before it shipped. Jeansonne says he is trying to develop a "living website." The website already supplements required releases and disclosures, and provides the most current information to stakeholders.

"A 14-page press release takes all night to proof and release. We now take that information, summarize it, and post it in a PDF that can be easily utilized by brokers and individuals. Plus, we can issue the release and PDF simultaneously." That change has already saved several thousand dollars and many hours of proofing time for each earnings release. That time and those resources can be used elsewhere in his program.

MLP of the future

Jeansonne is also reaching out to sell-side firms, especially those with a retail component. Twelve analysts currently cover Linn. Six of those initiated coverage this year, including Morgan Keegan, Oppenheimer and, most recently, Madison Williams. He hopes to have at least one other firm initiate by the end of the year. Always top of mind for analysts who cover MLPs is the ability of a company to raise its distribution. Analysts focus on coverage ratio to do that.

"A ratio over one means excess coverage and more flexibility for the company. That excess coverage could be reinvested in the company or provide for a distribution increase." Jeansonne expects Linn to grow production by 25% to 30% and have a coverage ratio of 1.38x for 2011.

Jeansonne describes Linn's model as a simple one, based on rolling up long-lived oil and natural gas properties by using low-cost equity capital. The MLP market is $350 billion, and E&P makes up only 6% of this segment. The oil and natural gas asset class, however, is many times the $350-billion MLP market, he says.

"Ultimately, we believe the E&P sector could be larger than pipeline and midstream sectors for MLPs," he says, noting that the eight MLPs that are E&P-focused, other than Linn, have a combined value of $11 billion.

Linn Energy’s first goal is to pay the distribution, and the second is to increase it in a responsible way; success has involved a hedging strategy.

Linn's enterprise value is now approximately $10 billion, outpacing them all. It acquired $1.4 billion in properties last year and more than $850 million so far this year. Most of Linn's acreage is held by production. Thus, Linn can develop its assets at a methodical pace. Jeansonne says predictable oil- and gas-derived income is a very saleable proposition to an entire generation of yield-seeking investors hitting retirement age.

"Baby boomers are now looking for retirement income. We take the cash flow generated from our oil and natural gas production and give it back to an income-hungry population." The partnership structure results in a tax-advantaged distribution, but unlike royalty trusts, Linn is actively managed. The other benefit of the model, according to Jeansonne, is that management's actions match unit-holder needs.

"As unitholders themselves, Linn's management team is closely aligned with the interests of all unit-holders." Accordingly, he says, the first goal is to pay the distribution, and the second is to increase it in a responsible way. Part of the ability to pay and potentially raise the distribution involves hedging. The company hedges a significant portion of its oil and natural gas production for approximately five years, which reduces commodity-price volatility and helps ensure stable cash flow.

"We can't control cash flow without hedging, and we are willing to forgo some upside to lock in a floor. That comes back to our primary mission: paying distributions," he reiterates.

This year, 70% of the company's positions are swapped, while 30% are protected with puts. The price floor is $85.70 per barrel, with 30% of its production benefiting from $100 crude. Similarly, the company's natural gas production has a floor of $8.24 per thousand cubic feet this year. In 2012, those floors move to approximately $90 per barrel and $6 per thousand cubic feet, respectively. "One thing we know for sure is, we don't know what commodity prices are going to do—that's why we hedge."

The company has provided great returns. At IPO, its units traded at $21 per unit. Now they trade around $38. That is a return of 200%, if distribution payments were reinvested over that period. Long-term, Jeansonne is convinced, MLPs beat the market under any condition, citing returns of the Alerian MLP Index compared to the S&P 500.

"Most E&Ps strive to deliver capital appreciation to their shareholders, while Linn focuses on delivering steady distributions and the potential for capital appreciation. We believe this is a better strategy to generate long-term value for our unitholders."