Michael Linn, the CEO of Linn Energy LLC, said Thursday he is still bullish on natural gas for the long-term, and his company is on the prowl for more gas-weighted acquisitions.
Speaking at the Lehman Brothers CEO Energy/Power Conference in New York City, Linn said gas will remain the “bridge fuel until we can find another way to generate electricity.”
Linn Energy, which was founded in 2003, launched a public offering to become an exploration and production (E&P) master limited partnership (MLP) in 2006 (see Daily GPI, Dec. 15, 2006). Linn Energy has completed 20 acquisitions since 2003 (six in 2007) at an average cost of $2.06/Mcfe. Last Friday it completed its largest acquisition to date: the $2.05 billion purchase of Dominion Resources Inc.’s Midcontinent properties (see Daily GPI, July 3), which assures its place as one of the largest E&P partnerships in the country.
The company has only just begun to build its stable of U.S. assets, said Linn. And low gas prices are no deterrent.
“Industrial demand [for gas] is not going to grow substantially, and consumer demand is not going to grow, but electric demand for gas is growing 2-3% a year,” Linn said. He acknowledged that onshore gas production has risen and liquefied natural gas (LNG) imports are rising, but offshore gas output is down and Canadian imports are declining. “Net-net, we are behind in production. We are finding less gas per well.”
Linn noted that “another way to look at the long-term [prospects] for gas is this…we’ve got [the] Kyoto [Protocol] and [carbon dioxide] CO2. And we can’t do enough with solar or hydro. The alternative fuels hold an 8% share of the market, but five years from now, alternatives will still only be 8%. Carbon sequestration has not happened yet, and clean burning coal plants take a long time to build and a long time to finance.”
Congressional energy legislation on the table at this point also will make little to no impact on gas demand, he said.
“We can’t keep up with it,” Linn said of the gas needed for U.S. markets. “LNG can help with the play, but we’re going to keep increasing electricity use. So, I’m still bullish on gas for the long-term. I thought that way before [gas prices dropped] and I still feel that way.”
That said, he assured conference attendees that his company is no where near ready to stop acquiring more oil and gas assets.
“There are considerable opportunities to grow the MLP space,” he said. “Most of the reserves in the United States are long-life reserves. The entire U.S. is a mature basin. There is 10 times the opportunity here than in Canada where they were doing the same thing [through income partnerships].”
The company has set a growth target through the drillbit of 3-4% a year, and Linn said more opportunities are ahead.
“We’re an acquisition machine, and we think there’s a lot out there to buy.” The company, he said, will continue to operate “like a wolf in sheep’s clothing targeting other sheep.”
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