LINN Energy (ticker: LINE) announced the sale of $2.3 billion in assets on October 3, 2014. The sale comes, as promised, to finance its previous acquisition of $2.3 billion in assets from Devon Energy. The Devon purchase was announced in June and closed in August.
LINN is making strides in rebalancing its portfolio. In its Q2’14 conference call, management said it plans on selling its high decline, more capital-intensive projects in order to bolster its position with “long life, low decline properties,” said Mark Ellis, President, Chairman and Chief Executive Officer of LINN Energy. “This transactional asset rotation is expected to result in a more stable base business and sets the stage for future growth,” he said.
LINN Energy operates as an E&P and its subsidiary, LinnCo, raises additional capital in order for the companies to continue its acquisition strategy. LINN Energy has made more than $15 billion in transactions since 2008 and is now a top-15 independent oil and natural gas development company.
Asset Breakdown: Sales
The $2.3 billion in sales comes from two separate transactions, as listed in the table below. The company is planning to sell the remainder of its Midland properties by the end of the fiscal year.
LINN had planned on spending approximately $305 million on exploiting these assets in 2014 through a six rig program. Both transactions are expected to close in Q4’14. Its Wolfcamp/Midland position is prospective for horizontal drilling and the company “continues to see strong interest in the market for a trade or sale of these assets,” according to its release.
Asset Breakdown: Acquisitions
LINN’s $2.3 billion acquisition of Devon’s properties earlier this year spanned the country. Assets were picked up in five separate locations and yielded production of approximately 275 MMcfe/d (80% gas) with a shallow base decline of roughly 14%. The properties held 3,880 producing wells across 896,000 net acres, along with an additional 1,000 identified drilling locations and 600 recompletion opportunities. Proved reserves for the properties ranges from 1.3 to 1.5 Tcfe, and total resource potential is roughly 3 Tcfe.
LINN’s spread across the U.S. kicked off in December 2013 with the merger/acquisition of Berry Petroleum. The merger held a transaction value of $4.9 billion and provided LINN with access to more long life liquid reserves. Stability through the long life reserves, along with a predictable balance sheet, are the staples of LINN’s future plans. Management said the company is fully hedged on expected gas production through 2017.
More transactions are expected in LINN’s future. “As evidenced by significant transaction activity during 2014, we continue to believe the rationalization of the E&P space between growth assets and material assets is accelerating,” said Ellis. “LINN is well-positioned to take advantage of this trend.”
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