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Linn Now Eyeing Split into Two Onshore Companies; Management Team Stepping Aside

Linn Energy Inc. revised its initial plan to separate into three standalone companies and now expects to break into two entities in 3Q2018: a pure play exploration and production (E&P) company focused on the Midcontinent, and an upstream and midstream outfit with assets in several unconventional regions. The entire management team, including CEO Mark Ellis, also is planning to retire.

Under the revised plan, Houston-based Linn would become a holding company for Roan Resources LLC, an E&P that is developing Oklahoma's myriad basins within the Anadarko Basin -- specifically, the Merge prospect, the SCOOP (aka the South Central Oklahoma Oil Province) and STACK (aka the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties).

In a strategic update Wednesday, Linn said it had executed a term sheet with Roan Holdings LLC, the successor to Tulsa-based Citizen Energy II LLC, which should consolidate 100% of the equity in Roan under Linn. Last December, management said it was in talks with privately held Citizen, a Roan partner, to consolidate its stakes into Linn.

A second company created under the revamped plan, Riviera Resources LLC, would hold upstream assets in the Hugoton Basin in Kansas, the Drunkards Wash Field in Utah, the Arkoma Basin, Michigan, Illinois East Texas and North Louisiana. It also would have assets in the northwestern part of the STACK play, where Riviera is to retain more than 100,000 acres. Riviera would also include Blue Mountain Midstream LLC, Linn's midstream subsidiary.

Linn previously had stated that Chisholm Trail, a natural gas gathering, compression and processing system in the Merge, would be Blue Mountain's "primary asset" at separation. Blue Mountain secured about 7,200 acres in the Merge last December.

As proposed, Roan is to be listed on the New York Stock Exchange or Nasdaq under the ROAN ticker while Riviera would be traded over-the-counter (OTC) under RVRA. Linn is currently traded OTC under LNGG.

Linn had previously planned to separate into Roan, Blue Mountain and a third entity dubbed "NewCo," which as to include some E&P and midstream assets. Linn emerged from bankruptcy in March 2017, and has since been selling assets and repurchasing shares.

Ellis plans to retire once the spinoff is complete. COO Arden Walker and senior vice presidents Thomas Emmons, Jamin McNeil and Candice Wells also "plan to depart at or prior to consummation of the spinoff." The company did not elaborate, other than to say it had entered into separation agreements with the executives "that governs the terms of each of his or her separation from Linn and obligations during the transition."

Linn said David Rottino is to serve as Riviera CEO once the spinoff is complete, joined by COO Dan Furbee and CFO Jim Frew Darren Schluter is to join Riviera's executive team as chief accounting officer, while Holly Anderson would serve as general counsel. Riviera's board would include Rottino and Blue Mountain CEO Greg Harper, plus Evan Lederman, Andy Taylor, Matthew Bonanno and Phil Brown.

A new management team also is to take the reins at Blue Mountain post-spinoff. Besides Harper, Brad Reese would serve as chief development and corporate services officer, while David Weathers would serve as chief commercial officer.

Linn is holding a conference call on May 3 to discuss first quarter results.

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