Linn Energy LLC (LINE) and its parallel shares LinnCo LLC (LNCO) suspended distribution payments starting in the fourth quarter, or October 2015. The move caught me entirely by surprise. The market did not react well, and the LNCO share price lost another 47% of its value over the next three trading days.

Since Linn no longer pays any distributions, it is no longer an income stock so the investment evaluation requires a different approach. At this point, I am recommending that if you own LNCO or LINN shares to continue holding.

I think that to a certain extent, the distribution suspension was a reaction to the market not putting any value on the distributions. MLPs like Linn Energy use their equity units as currency to fund growth or acquisition projects. With a 20%+ yield, equity funding was not a viable option. So, as a management team, one reason to continue to pay distributions became invalid with the units priced to yield so high.

Through the first half of 2015, Linn generated more than enough free cash flow to fund its reduced capital spending plans and pay the lowered (as of January 2015) distribution rate. The company's hedges on future production indicate that Linn could continue to pay the distributions through 2016. After the end of next year, the cash flow picture became a problem if energy prices stayed low.

By suspending the distributions, paying off some debt, and reducing production expenses, Linn should generate $500 to $700 million in free cash flow between now and the end of 2016. At the current $3.15 per unit, LINE (all LNCO shares are backed by an equal number of LINE units) has a market cap of $1.1 billion. This means that the company is trading at less than 2 times the free cash flow it should produce over the next six quarters. If Linn can find a way to continue a similar level of cash flow past the end of next year, this will, in hindsight, appear to be a stupidly low valuation on the company.

With the freed up cash flow, Linn has several options: