Acreage swap may, or may not, be ideal for Linn Energy

|About: Linn Energy, LLC (LINEQ)|By:, SA News Editor

Opinions are mixed on Linn Energy's (LINE +0.4%; LNCO +0.4%) acreage swap with a unit of Exxon Mobil (XOM -0.5%) that adds production of ~85M cfe/day for Linn.

Raymond James analysts call it "quantitatively, an ideal swap," since Linn is essentially trading production that is declining at ~35%/year for gas properties that are declining at 6%, resulting in much more stable cash flow; also, the deal allows Linn to lever its already large Hugoton position to help deliver more operating synergies.

Citigroup’s Faisel Khan is not so sure Linn got the better of the deal: Linn estimates net accretion to distributable cash flows of $0.09-$0.12 per unit on an annualized basis, but Linn is giving up upside from the Midland basin assets resulting from additional capital spending later this year.