LINN Energy LLC (Nasdaq: LINE) has signed a nonbinding letter of intent with private capital investor Quantum Energy Partners to fund selected future oil and natural gas acquisitions and development on those acquired assets (QL Energy I LLC or AcqCo).
Subject to final documentation, Quantum has agreed to initially commit up to $1 billion of equity capital to fund acquisitions and development of oil and natural gas assets. LINN will have the ability to participate in all acquisition opportunities with a direct working interest ranging from 15% to 50%. AcqCo assets will be managed by LINN in exchange for a reimbursement of general and administrative expenses. Additionally, after certain investor return hurdles are met, LINN will have the ability to earn a promoted interest in AcqCo. Upon the sale of any assets within AcqCo, LINN will be given right of first offer to acquire those assets.
The $1 billion equity commitment, combined with the ability to leverage AcqCo and LINN's acquisition of a direct working interest, results in the potential to exceed $2.5 billion of acquisition and development funding from the AcqCo alliance. Furthermore, the agreement also provides for potential future commitments of equity capital from Quantum, thereby increasing the ultimate size of AcqCo.
AcqCo’s board of directors will comprise five directors, with Quantum and its representatives retaining three seats and LINN having two seats. The partnership will be focused on conventional and unconventional resource development opportunities across the US.
Jefferies LLC is acting as financial advisor to LINN for the AcqCo agreement. Latham & Watkins is providing legal advice to LINN, while Vinson & Elkins is providing legal advice to Quantum for this transaction.