Well, I laugh when I read that type of thoughtful analysis.
It reminds me a bit of when Linn bought in to a new basin in the Williston basin in ND.
...... and by some at the time it was thought that Linn may have overpaid (LOL) ....articles were written & in blogs etc.
...by those who track bakken acreage tranactions like The Million Dollar way (you can easily check the comments from back then).
Well, there have been some considerably more expensive asset/acreage purchases in the Williston basin since then as you probably expected.
....Oh, then sometime afterward, Continental Resources proved the multiple benches of the Three Forks,
And, the USGS re-evaluated their 2008 Recoverable Reserve estimate for the area and Continental now thinks that the Williston basin holds up to about 903 Billion barrels of oil.
So, with that Continental multiple benches of three forks discovery, the oil reserves there just about doubled......
What bakken-acreage that once looked expensive back in 2011 would be considered much, much more valuable today.
Oh, then there are also the technology improvements as time goes by.
For example, there is a new completion method being used by Whiting & reported recently..... that they are getting 50% to 75% more per well.
Since the recovery percentage in the bakken/three forks is now roughly between 5% to 8% that leaves about 92% to 95% of the oil in place. Continental Resources recoverable reserve estimate of up to 45 billion barrels is based on their 903 billion barrels estimate of oil place using only a 5% recovery number.
So about how many productive zones has Linn already produced from in the Permian basin?
Was it 9?
about how much more acreage will the BRY transaction add to what Linn now has there for a total of about 160,000 acres?
And, that is just the Permian basin.
What about California...etc?
Then vote no on the the merger, David. Although it may be too soon to tell, the market doesn't seem especially pleased with it. And I'm feeling somewhat disheartened at how much Linn is giving away for Berry. I guess the question is how badly does Linn need it. I wonder if they even know, as it's easy to get caught up in your own spin and become self-deluded. So maybe I'm in the Goldman Sachs camp: choosing a neutral stance because we don't know what to think. (Neutral sounds better than baffled.)
The offer was steep, but we all knew Linn needed to close the deal, and they made it happen. The accretion clearly isn't as good at 1.68x versus the 1.25x but it helped solve a lot of problems for Linn including coverage ratio and more importantly, a bloated balance sheet that desperately needed a shot in the arm in terms of equity. The Permian deal helped the coverage, but pushed the debt metrics even further from where they needed to be. Berry gave them both accretion on a per unit basis and also a huge slug of equity, which is a win-win and they paid up to make it happen.
I'm actually quite surprised at how many Linn longs are complaining about the increased price. It's accretive, it pushes the capital structure back where it needs to be, it pushes their gas/liquids towards more liquids heavy than gas heavy, it gives them a slew of high IRR oily PUDs, which they desperately need, it paves the way for future c-corp deals. It also ENDs the discussion around distribution cuts. Yes, they paid a hefty price. Yes, it means going forward another 90 million units to be fed making future growth much harder, but it solved a lot of ugly problems. Did anyone really think Berry management was going to take a haircut? They did their job of maximizing value for their shareholders.
............maybe you have not yet seen this MF article:
"1 Impressive Number from this Texas Oil Field"
From today 11/6/13 by Matthew DiLallo
BRY doubles the Permian for Linn......isn't that what I heard in the CC?
This is from the article:
"reported a lot of numbers in its third-quarter earnings release. However, one really stood out as an impressive result. That number is the estimated ultimate recovery of some of its recent shale wells, which could top 1 million barrels of oil equivalent over the lifetime of the well.
The estimated ultimate recovery of a well takes current production data and projects how much oil and gas that well will produce over its lifetime. The more a well produces, the higher the returns for drillers like Pioneer Natural Resources. In the case of this past quarter's numbers, many of the horizontal wells it drilled into the Wolfcamp A and B in Texas' Permian Basis are expected to exceed 800,000 barrels of oil equivalent. Further, as the slide below shows, cumulative recoveries are on a pace that could exceed 1 million barrels of oil equivalent."