Hedging gains contribute a sizable percentage of Linn's distributable cash flow.

The company spent $583 million on derivatives purchases in the first nine months of 2012, and hedging gains in that period tot aled $281 million, or 55% of distributable cash flow of $503 million. The company's financial reports don't break out the derivatives costs that are included in gains, but Linn's history of derivatives purchases suggests annual costs of $100 million to $150 million. Amoss' $120 million estimate is squarely in that range. Linn expenses the cost of puts and other derivatives over a multiyear period whe n calculating net income, as mandated by accounting rules. But it doesn't deduct such costs from distributable cash flow, a financia l measure that isn't compiled in accordance with GAAP, or generally accepted accounting principles. This means companies have lee way in making the latter calculations. Usually, they subtract interest expense and maintenance capital expenditures from gross c ash flow to derive the amount of cash available to be distributed to holders.