Linn Energy Acquires Jonah Field
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Linn Energy, LLC (NASDAQ: LINE) recently announced the acquisition of Wyoming’s Jonah Field from BP PLC (NYSE: BP) for $1.025 billion. The acquisition will add approximately 145 million cubic feet equivalent per day of liquids-rich natural gas production. The deal will also add immediately to Linn’s distributable cash flow per unit. Plus, it offers significant drilling inventory. According to Linn Energy CEO Mark Ellis, “The long-life, low-decline characteristics of the Jonah Field make this asset an excellent fit for us.” Some of the significant characteristics expected from this acquisition are proved reserves, maintenance capital, and potential for production optimization and cost savings. The deal is expected to close by July 31.
Linn Energy is one of the top 15 U.S. E&P companies. It became the first publicly traded independent oil and natural gas LLC in January 2006. Since then, Linn has paid a consistent quarterly dividend. So far it appears to be handling the acquisition with a long-term mentality. Linn Energy has proven to be a consistent hedger, never failing to look out for the future. This time is no different. The company has hedged approximately 100% of the oil and natural gas production associated with this acquisition through 2017. Linn used a combination of swaps and puts to hedge its production volumes; this preserves a significant upside if commodity prices rise.
For BP, the sale of Jonah Field will not be expected to have much effect on the company’s bottom line or production targets. With a market capitalization of approximately $118.98 billion, a $1.025 billion deal will have little effect on this company. BP is one of the world’s leading international oil and gas companies. It refines over 2,300 thousand barrels per day.
Like Linn Energy, Forest Oil Corporation (NYSE: FST) is a smaller, domestic company. Forest Oil’s vision is to be the most efficient exploration and production company in the oil and gas industry. Forest Oil is headquartered in Denver, but operates sites throughout the U.S.
Another of Linn’s direct competitors is Anadarko Petoleum Corporation (NYSE: APC). Unlike Linn and Forest Oil, Anadarko considers itself a more global competitor, with production facilities spread throughout the Gulf of Mexico, Africa, New Zealand, and China. Anadarko is among the largest independent oil and natural gas exploration and production companies in the world, with 2.54 billion barrels of oil equivalent in proved reserves at the end of 2011.
This acquisition will result in an increase in profit and resources for Linn Energy. The company is slated to go far in the energy sector. This acquisition is at the core of their mission to acquire, develop, and maximize cash flow from a growing portfolio of long-life oil and natural gas assets.
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