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Linn Energy Enters Bakken Play

Linn Energy has agreed to pay $196 million to Concho Resources to acquire oil properties in the Bakken play in North Dakota, the companies said Monday. The properties are expected to add current net production of about 1,350 Boe/d (94% of it oil), proved reserves of approximately 8 MMBoe (83% oil) and more than 400 potential oil drilling locations, according to Linn.

The sale is expected to close by March 31 subject to customary closing conditions and purchase price adjustments.

Linn also signed definitive purchase agreements totaling $238 million for a pair of bolt-on acquisitions to expand its position in the Permian Basin of Texas and New Mexico. The properties are expected to add current net production of approximately 1,650 Boe/d (87% oil and natural gas liquids (NGL)), provide reserves of approximately 14 MMBoe (88% oil and NGL) and approximately 180 potential oil drilling locations. The Permian Basin deals are expected to close in the first week of April.

"All of these properties generate high cash margins in the current oil environment and meaningfully add to our inventory of oil drilling locations," said Linn CEO Mark E. Ellis. "These transactions will be immediately accretive."

The Bakken properties were nonoperated and noncore to Concho, according to Tudor, Pickering, Holt & Co. analysts, who had expected the divestiture but had estimated proceeds to Concho at $120 million, 63% below the actual purchase price.

Linn will fund the three deals, totaling $434 million, through an equity offering.

In 2006 Linn spent nearly half a billion dollars to acquire a leasehold in the oil-rich Texas Panhandle and enrich its natural gas-heavy assets in the Appalachian Basin. (see Daily GPI, Dec. 15, 2006). Three years later the Houston-based independent explorer and producer agreed to pay $154.5 million to build its leasehold in the Permian and Anadarko basins -- for the oil (see Daily GPI, Dec. 2, 2009) and last year it agreed to pay a Loews Corp. subsidiary $330 million to acquire gas properties in the Antrim Shale of northern Michigan (see Daily GPI, March 24, 2010). Linn ended 2010 with approximately 2.6 Tcfe of proved reserves in U.S. basins.

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