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Linn Energy: Highlighting The Value Of The Merge/SCOOP/STACK Assets


  • Linn Energy forms Roan Resources in partnership with Citizen Energy.
  • This puts a spotlight on the value of the Merge/SCOOP/STACK assets and helps distance those assets from the stigma associated with Linn's bankruptcy.
  • Linn's bankruptcy was very costly to a large number of individual investors and thus there is considerable distrust of Linn.
  • Linn's new corporate structure and lack of debt make the chances of a second bankruptcy very low though.

Linn Energy (LNGG) continues to make progress post-restructuring, with its formation of Roan Resources in partnership with Citizen Energy. Linn has also divested the last of its California assets, and will have no outstanding debt. Linn's lack of debt should position it well for the current oil price environment, while the formation of Roan Resources should help provide a clear picture of the value of the Merge/SCOOP/STACK position, as well as help distance that asset from the stigma surrounding Linn's previous bankruptcy.

Roan Resources

The main recent news with Linn is the formation of Roan Resources in conjunction with Citizen Energy. The two companies are each contributing around 70,000 net acres in the Merge/SCOOP/STACK and will each own 50% of the new company. Roan's 140,000 net acres includes approximately 103,000 net acres in the Merge play. Linn's Merge production was around 6,700 BOEPD at the end of 2016 and was forecasted to reach 16,700 BOEPD at the end of 2017. Roan Resources is expected to have over 40,000 BOEPD in production by the end of 2017. Linn mentioned field level cash flow margin of around $18 per BOE at $45 oil and $3 natural gas, which may translate into over $225 million EBITDA for Roan based on 40,000 BOEPD production.

Source: Linn Energy

The combination of acreage will allow around half of the resource potential to come from longer-lateral drilling units. Laterals are becoming increasingly long these days (making contiguous acreage valuable). As well, the formation of Roan Resources should highlight the value of Linn's Merge/SCOOP/STACK assets, separate from its low-decline assets. The new company will also have a different management team, allowing it to distance itself from the stigma attached to Linn's name and management.

California Sale

Linn sold its remaining California properties for $100 million in early June. This sale

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