Seeking Alpha

Linn Energy to acquire Devon non-core U.S. properties for $2.3B

  • Linn Energy (LINE, LNCO) agrees to acquire U.S. oil and gas properties from Devon Energy (DVN) for $2.3B.
  • The assets currently produce ~275M cfe/day (~80% gas), with total proved reserves of 1.3T-1.5T cfe and total resource potential of ~3T cfe.
  • The asset package is comprised of ~900K net acres across the Rockies, Mid-Continent, east Texas, north Louisiana and south Texas regions with ~4,500 total wells; LINN says it has identified 1K-plus future drilling locations and ~600 recompletion opportunities.
  • LINN says the acquisition will be financed ultimately through the sale of its Granite Wash assets and other non-producing acreage in its portfolio.
  • DVN says the deal covers remaining U.S. assets it had targeted for divestiture, and that the sale of Canadian and U.S. non-core properties over the past few months has generated $5B-plus in proceeds at an accretive multiple of nearly 7x 2013 EBITDA.
  • LINE +0.3%, DVN +0.4% premarket.
Comments (47)
  • jerrywengler
    , contributor
    Comments (402) | Send Message
     
    Wow! Here we go again.
    30 Jun, 09:16 AM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    J W

     

    Looks like the Linn guys are shaking up the game again. Either they have a good idea where they think going, or this could be a very bump ride.
    30 Jun, 10:19 AM Reply Like
  • Lexicfo
    , contributor
    Comments (6) | Send Message
     
    The Motley Fool article from a couple of days ago about 2014 being a slow M&A year for MLPs really got this wrong...
    30 Jun, 09:29 AM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (662) | Send Message
     
    The Motley what?

     

    Exactly.
    30 Jun, 09:31 AM Reply Like
  • okieoil
    , contributor
    Comments (187) | Send Message
     
    I am happy with almost anything accretive that will involve getting out of the Granite Wash. Confirms my already high regard for the LINE management.
    30 Jun, 09:33 AM Reply Like
  • BBBerry
    , contributor
    Comments (21) | Send Message
     
    LINE making aggressive moves shows minds working behind the scenes. Wish I had doubled down on the last dip!
    30 Jun, 09:53 AM Reply Like
  • mbaietti
    , contributor
    Comments (39) | Send Message
     
    I find it interesting that they seem to be focusing on Nat gas production.
    30 Jun, 10:01 AM Reply Like
  • Energysystems
    , contributor
    Comments (944) | Send Message
     
    I agree, especially considering the thesis for the Berry acquisition was to decrease their dependency on nat gas. But, I trust the guys running the show at Linn that they know more than me.
    30 Jun, 10:15 AM Reply Like
  • okieoil
    , contributor
    Comments (187) | Send Message
     
    Natural gas is what LINE knows and has been historically successful pursuing. They state their reserves in CFE rather than the more common BOE for companies focused on oil/liquids. I would prefer to see BOE,for the same reasons I prefer USA standard units vs the metric standard units. I speak both languages, but am more comfortable with feet and inches.
    Due to the still depressed prices of NG just now, NG reserves are those most readily available for good prices . JD Rockefeller famously stated that the secret to the accumulation of wealth was to purchase cheaply and sell dear. I wish I had bought a few more LNCO on the dip myself. When NG goes up, LINE/LNCO will be in a good position to profit. Until then, there is enough oil/liquids in the portfolio to keep our distributions coming. IMO, the only caveat is that LINE's forward hedging tends to dampen the potential benefits as well as limit risk. At the moment, I am not overly concerned with a drop in gas prices. They have guessed mostly right so far so I am not about to nit-pick their strategy.
    30 Jun, 10:21 AM Reply Like
  • Chancer
    , contributor
    Comments (2523) | Send Message
     
    That must be why the LNCO share price is performing so great from 40+ to 30, or less.
    30 Jun, 12:32 PM Reply Like
  • 389190
    , contributor
    Comments (31) | Send Message
     
    According to Wells Fargo it looks like Linn overpaid by about a $1 billion( see breaking news for DVN). I am long LNCO.
    30 Jun, 12:40 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    chancer

     

    Every thing in life can be viewed as a glass half full or a glass half empty.
    For those like yourself who quote 40 from over a year ago are looking out the back window. So you missed several opportunities to trade it profitably.
    Try being useful by looking forward and tell us how you rate the distribution rate and where the price in your opinion is going. If not your
    wasting peoples time regurgitating history we are aware of.
    30 Jun, 12:51 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (662) | Send Message
     
    The Linn strategy is not based upon proper guessing, but to hedge their production in a most disciplined and safe manner so as to ensure that they can meet and exceed coverage ratios. Linn is not about timing the markets or being greedy when others are fearful or fearful when others are greedy.
    Linn is about making that money so as to distribute it to the unit holders.

     

    When you do your research and diligence on Linn Energy one of the most important criteria is whether they are over their coverage ratio, if so then all is mostly well and the investment is mostly safe and secure.

     

    It's not rocket science, but it is a way for the common unit holder to somehow own and take advantage of energy, gas, and oil.

     

    Oh and the distribution is quite nice and safe, despite all the nay saying over the past years.
    1 Jul, 10:47 AM Reply Like
  • jerrywengler
    , contributor
    Comments (402) | Send Message
     
    Agreed, Capt. Jack. And, it's the distribution I'm in Linn for even though at current market I look for it to be above $40 next year. That is only good for me because it signals the company is doing well while I keep collecting my monthly. I love the current distribution, but I'll dance an extra step when they raise it.
    1 Jul, 11:19 AM Reply Like
  • critterlitter
    , contributor
    Comments (369) | Send Message
     
    Hopefully Linn will come out with some details as how they see this panning out for them and the shareholders. Certainly, I am not pessimistic about this because they did unload turf that was going nowhere for them. With this said, I look forward to factual details that provide more comprehensive information.

     

    We also still have the other half of the Midland turf to strike a deal with. This present deal sounds like a step in the right direction for Linn. Let's see how it pans out...

     

    Peace.
    30 Jun, 10:21 AM Reply Like
  • 389190
    , contributor
    Comments (31) | Send Message
     
    Linn hasn't unloaded anything to pay for this YET. They say they plan to pay for this with the ultimate sale of "Granite Wash".
    30 Jun, 11:03 AM Reply Like
  • Chancer
    , contributor
    Comments (2523) | Send Message
     
    And they are taking on more debt until they sell Granite Wash.
    30 Jun, 12:34 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    chancer

     

    True, debt could be a disaster or a very good move only time will tell
    how it will work out for management.
    30 Jun, 12:54 PM Reply Like
  • Michael_Phillips
    , contributor
    Comments (472) | Send Message
     
    "And they are taking on more debt until they sell Granite Wash. "

     

    Which means any potential buyer of that acreage knows that LINN is over a barrel. Not an excellent negotiating tactic when you announce to the world that you really, really need to sell something to cover your debts elsewhere. Risky move.
    30 Jun, 01:12 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (662) | Send Message
     
    Linn, for its part, said it has secured $2.3 billion of committed interim financing for the acquisition of the assets.

     

    Linn is hardly over any barrel. If Linn was in any issues or troubles Linn would have not been able to so quickly come up with 2.3 billion of dollars in financing.

     

    Linn is hardly giving away any secrets that it been planning on selling other assets of which Linn has plenty.
    30 Jun, 01:57 PM Reply Like
  • Michael_Phillips
    , contributor
    Comments (472) | Send Message
     
    Man, that's an awful lot of Kool Aid to swallow in one sitting, Jack.

     

    And this: If Linn was in any issues or troubles Linn would have not been able to so quickly come up with 2.3 billion of dollars in financing.

     

    That was priceless. Because we all know that financing is only available to the best and most solvent borrowers out there.
    30 Jun, 02:52 PM Reply Like
  • Energysystems
    , contributor
    Comments (944) | Send Message
     
    Phillips, you can't have it both way, either Linn is over a barrel, or for some wild and crazy reason, they were able to secure multi-billions for funding this acquisition.
    30 Jun, 02:56 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    CAPT J D

     

    Your spot on. I think based on other comments, your mentioning of the 2.3 bil commitment is braking news or some folks. I always feel sorry for those who pull the trigger based on front page news, while those who read the business columns are aware a month in advance.
    30 Jun, 03:02 PM Reply Like
  • Michael_Phillips
    , contributor
    Comments (472) | Send Message
     
    "Phillips, you can't have it both way, either Linn is over a barrel, or for some wild and crazy reason, they were able to secure multi-billions for funding this acquisition."

     

    I don't even know what to say to this. To think that these two conditions cannot coexist is beyond my comprehension. For an example of how to fly too close to the sun yet fool enough lenders into handing you the blank check you always need please see Energy, Chesapeake.
    30 Jun, 03:59 PM Reply Like
  • jerrywengler
    , contributor
    Comments (402) | Send Message
     
    If Linn is over a barrel, it's another barrel of oil.
    30 Jun, 04:26 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (662) | Send Message
     
    jerrywengler
    Comments (327)

     

    If Linn is over a barrel, it's another barrel of oil.

     

    LMAO good one :)
    30 Jun, 04:35 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    MP
    Chesapeake seems to have learned their lessons so at this moment they didn't fly close enough.
    if you go through history many oil companies have borrowed on this scale or more, your acting like this is a novelty. Now I agree that Devon was one of the companies on the radar but the comments today act like they never seen this coming.
    30 Jun, 04:48 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    jerry

     

    I second capt jack
    30 Jun, 04:49 PM Reply Like
  • Capt.Gene
    , contributor
    Comments (74) | Send Message
     
    Sorry for your lack of understanding, but there are no lenders being fooled, just investors listening to shorts with a nonsensical story to spin.
    2 Jul, 09:25 AM Reply Like
  • Capt.Gene
    , contributor
    Comments (74) | Send Message
     
    Adding oily assets before the current run up and now adding gassy before wholesale export takes off is just good business. My hat's off to the management team, and thanks again to HedgeEye and Bloomberg for the recent chance to double down from my $12.68 position.
    30 Jun, 10:57 AM Reply Like
  • Plaintalk
    , contributor
    Comments (114) | Send Message
     
    Where or where is RLP? I suspect that fairly soon he will disappear into oblivion as LINE does better and better and distributions increase.
    30 Jun, 10:59 AM Reply Like
  • okieoil
    , contributor
    Comments (187) | Send Message
     
    RLP may sometimes sound like Debbie Downer, but he does his homework. I don't always agree with him but I ALWAYS want to here what he has to say. He is unashamedly out to preserve and increase his capital and increase his dividends. I think some of his expectations are counterproductive or at best short sighted, but totally ignore his thoughts at your peril.
    30 Jun, 05:56 PM Reply Like
  • CWAmember
    , contributor
    Comments (62) | Send Message
     
    These guys know what they are doing. They are buying low decline gassy assets based on today's cheap pricing and off loading highly desirable oily, but capital intensive and high decline assets at a premium. Exporting natural gas commences in 2015 with Chenerie (LNG), which BTW, just signed another 20 year export agreement today for trains that will be ready in 2019.
    30 Jun, 12:23 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (662) | Send Message
     
    Mike you should at least try the drink and do more research before you go all half-cocked with false innuendos and claims of some successful energy company being in a pickle.

     

    That's one large pickle jar and one sweet tasting dividend.
    30 Jun, 04:09 PM Reply Like
  • Michael_Phillips
    , contributor
    Comments (472) | Send Message
     
    I'll give you all the money in my wallet if you can show where I said they were in a pickle. Also, maybe look up what "innuendo" means before going all half-cocked and try to use it in a sentence where it clearly doesn't belong.
    1 Jul, 09:57 AM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    MP

     

    you used
    the term over a barrel and the term in a pickle basically were derived

     

    from the pickle barrels that was used in prisons as a punishment device.

     

    so for many the terms are interchangeable.
    1 Jul, 10:32 AM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (662) | Send Message
     
    The way some people post you would think that getting a few billion dollars of financing together is like as easy as returning tossed returnable bottles.

     

    Linn Energy is a good company and they are soundly managed and operated.

     

    A ten thousand dollar investment in Line 5 years ago would produce you 25,000 today plus all the dividends in the mean time.
    1 Jul, 12:24 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    C J D

     

    All you have to do to get a Billion dollars is submit about 50,000 pages of documents. Surely it can be done on a weekend.

     

    Tongue firmly in cheek
    1 Jul, 12:33 PM Reply Like
  • okieoil
    , contributor
    Comments (187) | Send Message
     
    Does anyone know where (Refinery, Plastics plant, NGL processing plant, fertilizer plant, etc) and how (pipeline, truck or rail car) the Jayhawk Gas Plant sells the liquid condensate produced there? I have an idea I want to share, but want to make sure I am not jumping to an incorrect conclusion(s). I expect that someone out there already knows. If no one can answer, I will call LINE investor relations.
    1 Jul, 01:48 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    OKIEOIL

     

    JAYHAWK Is owned by Linn and the have pipelines. Not sur what you looking for.

     

    http://bit.ly/1z5DYNJ
    1 Jul, 02:51 PM Reply Like
  • okieoil
    , contributor
    Comments (187) | Send Message
     
    Thanks. This is good information about the plant, but it does not say where does the product go? Methane sweetened to at or above 1MBTU/ft3 with ethane goes down the gas sales pipeline. I am interested in where and how the CH2 and above is marketed. CH2 (ethane as in the infamous "ethane rejection" can go down the pipeline or it can be collected as feedstock for a polyethylene plant, etc. CH3 and CH4 can be sold as propane and Butane. C2+ can be sold as condensate or NGL's. Propane and Butane need to be moved by pipeline, rail car or truck as they are a gas at ambient temperature. NGLs can go several places by all of the above methods but normally do not go in the same pipeline (if any exists). I know LINE has pipelines for gathering. I am also sure that there is a methane sales line. It is all the other CH2 plus' that I want to know where is their destination(s).
    1 Jul, 03:38 PM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    OKIEOIL

     

    From an aerial shot the there is a rail line running thru the plant not much that I could find the jay hawk plant is in grant count maybe this will help

     

    http://1.usa.gov/1rVamOu
    1 Jul, 06:38 PM Reply Like
  • okieoil
    , contributor
    Comments (187) | Send Message
     
    The plant appears to be hooked into ONEOAK NGL pipeline. That is good for selling NGL. Does not help with fractionated Propane and Butane sales outside of mixed NGL with all liquid fractions. I wish that there were a RR siding in the plant. If I read the map correctly, it is 2 miles to the nearest RR. RR would give more options for selling of fractionated liquids. Thanks NYCTEXASBANKER
    2 Jul, 01:06 PM Reply Like
  • jerrywengler
    , contributor
    Comments (402) | Send Message
     
    I'll be going through Southwestern Kansas to Western Colorado the last half of August, and I would like to go by the Jayhawk if family wants to cooperate. I'll take note of the railroad setting from the ground if I get the chance. If successful, I'll report on a current LINE report in q/a what I saw. I am a Kansas resident who has been aware of the Hugoton most of my life so I find Linn's presence there especially interesting.
    3 Jul, 10:18 AM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    J W

     

    THANKS The more information we get the better the decisions we make.
    3 Jul, 10:48 AM Reply Like
  • okieoil
    , contributor
    Comments (187) | Send Message
     
    Thanks Jerry. I look forward to whatever you can scare up. Hugoton is not going away in many of our lifetimes. It was producing when I was born ... It is truly a giant gas field. That Jayhawk plant has possibilities. If LINE is not willing to maximize them, they should monetize the plant so someone will.
    4 Jul, 08:15 AM Reply Like
  • NYCTEXASBANKER
    , contributor
    Comments (1824) | Send Message
     
    OKIEOIL

     

    My understanding is the Jayhawk plant is about half used. I also think that with linn acquiring more Hugoton acreage the plan is to maximize the plant as NG is starting to be used as a feedstock for transportation and replacing oil in some lubricants
    4 Jul, 09:57 AM Reply Like
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