LINN Energy LLC Hits a High Note

LINN Energy and LinnCo announce $2.3 billion in asset sales.

Matthew DiLallo
Matthew DiLallo
Oct 6, 2014 at 9:27AM
Energy, Materials, and Utilities

LINN Energy (OTC:LINEQ) and LinnCo (UNKNOWN:LNCO.DL) announced Friday that LINN Energy has finalized a deal to sell its entire position in the Granite Wash and Cleveland plays for $1.95 billion. That's right at the high end of what the company was said to be seeking for those assets. LINN also announced that it was selling part of its remaining acreage position in the Midland Basin for $350 million. Add it all up and LINN Energy is bringing in $2.3 billion in cash and still has some acreage left in the Midland Basin for at least one final trade or sale.

Wrapping things up in the Mid-Continent
In its Mid-Continent deal, LINN Energy is selling about 145,000 net acres and 195 million cubic feet equivalent per day, or MMcfe/d, of current production. That's basically the company's entire position, though it is slightly less than what LINN Energy planned to sell when it announced its intent to unload the assets to pay for its deal with Devon Energy (NYSE:DVN). At that time, the company planned to sell 147,000 net acres and 225 MMcfe/d, as noted on the following slide.

Source: LINN Energy Investor Presentation. 

From this we can see just how quickly the production from these assets declines, which is why LINN Energy has been so eager to replace them.

Overall, LINN Energy appears to have received a strong price for the assets -- analysts expected the company to collect between $1 billion and $2 billion in the sale. That the agreed-upon sale price is at the high end of that range is certainly a positive outcome for LINN Energy.

Another move in the Midland
In LINN Energy's second announced deal of the day, the company said it has an agreement to sell 7,200 net acres and 4.6 thousand barrels of oil equivalent, or MBOE/d, of production in the Midland Basin. This acreage is located in Ector and Midland counties, Texas, which is area five on the map below.

Source: LINN Energy Investor Presentation.

LINN Energy chose to engage in a straight sale of these assets rather than finding a trading partner. While trading the asset for a low-decline oil position would have been the optimal outcome, this still isn't a bad deal. Instead, the company is essentially just trading this asset for a small portion of the assets it bought from Devon Energy earlier this year.

With three Midland Basin trades down, LINN Energy still has at least one deal left to go. The company has about 6,600 net acres and 8 MMboe/d of production that it plans to unload, which is roughly the size of the position it is selling now. The company could again seek an outright sale for these assets or make another trade. Whatever the case may be, it is very likely the company will announce a deal for these assets before the end of the year.

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Investor takeaway
With Friday's announcements, LINN Energy has largely completed its portfolio reshuffling for the year. With just a few thousand acres left to deal, LINN Energy has come a long way in just a few months. Because of that, LINN Energy looks poised to go on the offensive as we head into next year.