Houston’s Linn Energy LLC on Monday agreed to pay $1.025 billion in cash to acquire BP plc’s substantial natural gas operations in the Green River Basin of Wyoming.
The agreement gives Linn an operations center in Sublette County and all of BP America Production Co.’s working stakes in the Jonah and Pinedale Anticline fields, which includes 260 operated wells with net natural gas production of 80 MMcfe/d, as well as nonoperated wells with estimated output of 66 MMcfe/d. BP has about 750 producing wells across more than 12,500 net acres.
“This acquisition provides Linn with a significant operated position in the Green River Basin of Wyoming and the opportunity to add employees to our staff who have hands-on experience with operations in the Jonah Field,” said CEO Mark E. Ellis. “The long-life, low-decline characteristics of the Jonah Field make this asset an excellent fit for us. These properties are expected to provide approximately 145 MMcfe/d [55% operated] of liquids-rich natural gas production…and it holds significant future drilling inventory.”
The properties include about 730 Bcfe of proved reserves, more than half (56%) of which are proved, developed and producing, with a “low decline rate” of 14%, Linn management noted. The production is 73% weighted to natural gas, 23% to natural gas liquids and 4% to oil. The identified resource potential is about 1.2 Tcfe. The estimated adjusted earnings in the first year would be around $160 million, with estimated maintenance capital of $40-50 million, according to Linn.
Jonah, which is south of Pinedale, WY, covers about 21,000 square miles and is estimated to hold as much as 1 Tcf of natural gas. Sublette County has other large natural gas and oilfields that include the Wamsutter gas field, as well as several sour gas fields. BP’s upstream operations in Moxa and Wamsutter, WY, are not affected by the sale to Linn.
BP, still trying to wedge itself out from under debts and litigation related to the Macondo well blowout in April 2010, will have sold close to $24 billion of its assets since the start of 2010 once the Jonah portfolio sale is completed. BP plans to sell $38 billion worth of its portfolio by the end of 2013.
“This sale will allow us to realize the value of the mature Jonah assets and reinvest in higher growth opportunities in BP’s North America gas business and elsewhere,” said BP Group CEO Bob Dudley. “We are actively managing our portfolio of assets and businesses worldwide, focusing our investment on future growth in BP’s areas of strength.”
The sale, which is subject to closing conditions and a preferential right of purchase, is set to close by the end of July.
BP’s U.S. onshore upstream operations “are an integral part of its business and the company continues to look at opportunities for growth over the long-term,” the London-based producer stated. For instance, it noted that in March it leased more than 80,000 acres in the Utica Shale in Ohio (see Daily GPI, March 28). Although it has put some of its Gulf of Mexico properties up for sale, BP also remains the largest leaseholder in the Gulf of Mexico (see Daily GPI, June 21; May 2). Last year it produced more than 1.8 Bcf/d of natural gas in the United States.
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