Linn finds buyer to complete California exit

Linn Energy Inc., Houston, has found a buyer for the remainder of its California assets, advancing the firm’s ongoing noncore divestiture program.

The undisclosed buyer has agreed to take Linn’s 2,000 net acres in Brea-Olinda field of the Los Angeles basin in exchange for $100 million, with an additional $7 million contingent payment if certain operational requirements are satisfied within 1 year.

The properties, which lie in Orange and Los Angeles counties, produced 1,900 boe/d in the first quarter. Estimated proved developed reserves were 17.6 million boe as of Mar. 1 with updated pricing of $3/MMbtu for gas and $50/bbl for oil.

Linn forecasts full-year field-level cash flow associated with the properties of $21 million. For the second half, the firm had budgeted $2 million of capital for development of the properties. The deal is effective Mar. 1 and expected to close by the end of July.

The firm kicked off the divestiture program last month with an agreement to sell 500 net acres in South Belridge field of California’s San Joaquin basin to an undisclosed buyer for $263 million (OGJ Online, May 24, 2017). Evan Lederman, Linn chairman, cites “regulatory and operational complexities” as the reason for the firm’s California exit.

Other sales

Linn’s second noncore sale agreement during a busy May was nonoperated interest in 5,000 net acres in Salt Creek field of Wyoming to Denbury Resources Inc. for $71.5 million. The properties had first-quarter net production of 2,000 boe/d and proved developed reserves of 9 million boe as of Mar. 1 with updated pricing of $3/MMbtu gas and $50/bbl oil. The firm had budgeted $4 million of capital for second-half development of the Salt Creek properties.

The firm’s biggest deal of that month, though not part of its announced noncore divestiture program, was its agreement to sell 27,500 total net acres in Wyoming—80% of which is undeveloped—including 16,000 net acres in the Jonah and Pinedale Anticline fields to Denver-based Jonah Energy LLC for $581.5 million (OGJ Online, May 2, 2017).

In total, Linn has announced more than $1 billion of asset sales thus far this year. In addition to unloading its California and Salt Creek acreage, the firm is marketing 20,000 net acres in the Williston, 90,000 in the Permian, and 130,000 in South Texas as part of the noncore divestiture program.

“Pro forma for these transactions, Linn expects to extinguish all remaining outstanding debt and add cash on the balance sheet, which will be used to maximize shareholder returns, including funding our recently announced share repurchase program,” said Mark E. Ellis, Linn president and chief executive officer. The firm, which emerged from bankruptcy earlier this year, had $8.4 billion in debt outstanding at the end of 2015.

Linn’s new focus includes 185,000 net acres in the SCOOP-STACK-Merge areas.

Contact Matt Zborowski at matthewz@ogjonline.com.

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