LINN Energy LLC (NASDAQ: LINE) has signed definitive agreements with Quantum Energy Partners and with GSO Capital Partners LP, the credit platform of The Blackstone Group LP (NYSE: BX). Additionally, LINN Energy has signed a definitive agreement to sell its remaining position in Howard County, Texas, in the Permian Basin for a contract price of $281 million.
The company’s agreement with Quantum Energy Partners will fund selected future oil and natural gas acquisitions and the development of acquired assets (QL Energy I LLC or AcqCo). 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 (WI) ranging from 15% to 50%. AcqCo assets will be managed by LINN in exchange for 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 the assets. Jefferies LLC acted as financial advisor to LINN for the AcqCo agreement. Latham & Watkins provided legal advice to LINN, while Vinson & Elkins provided legal advice to Quantum.
LINN Energy’s agreement with GSO Capital Partners LP will fund oil and natural gas development (the DrillCo agreement). Funds managed by GSO and its affiliates have agreed to commit up to $500 million with five-year availability to fund drilling programs on locations provided by LINN. Subject to adjustments depending on asset characteristics and return expectations of the selected drilling plan, GSO will fund 100% of the costs associated with new wells drilled under the DrillCo agreement and is expected to receive an 85% WI in these wells until it achieves a 15% internal rate of return on annual groupings of wells, while LINN is expected to receive a 15% carried WI during this period. Upon reaching the internal rate of return target, GSO's interest will be reduced to 5%, while LINN's will increase to 95%. Jefferies LLC acted as financial advisor to LINN for the DrillCo agreement.
Additionally, LINN Energy has signed a definitive agreement to sell its remaining position in Howard County, Texas, in the Permian Basin for a contract price of $281 million. The transaction is expected to close in the third quarter of 2015 with an effective date of May 1. The properties sold include 6,400 net acres prospective for horizontal Wolfcamp drilling and 2 MBoe/d of current production from 133 gross wells. RBC Richardson Barr acted as financial advisor to LINN for this transaction.