Linn Energy said to tap banks for $2B oil asset sale
As reported by Seeking Alpha:
" Linn Energy said to tap banks for $2B oil asset sale • 6:25PM
Linn Energy (LINE, LNCO) reportedly has hired banks to sell oil production assets in the Texas panhandle and western Oklahoma in an auction that could raise as much as $2B. Linn said in June it would sell the Granite Wash assets to pay back debt it took on to finance its $2.3B acquisition of oil and gas assets from Devon Energy.
Sources say other oil and gas companies likely will dominate the sale process, but P-E firms also have shown interest."
Personally, I like to be kept informed. News doesn't need to be earth shattering to be useful. I am more irritated when companies do not give updates on progress because I feel stockholders should not be kept in the dark except for competitive reasons.
Having said that, an auction will most likely bring the best price because buyers know Linn is under the gun to get the deal done because of the tax deadline. Knowing this, buyers will be trying to capture some of the gains Linn will save on taxes. The auction will transfer some of that pressure to the buyer.
What tax deadline are you talking about? If Linn simply auctions off properties I don't think that qualifies as a 1031 exchange. There may be tax gains or losses but there's no deadline for that. I personally think the "bank auction" is a sign of desperation since Linn has made purchases to bolster its distribution without the cash to do it and now has to "bank auction" other assets to pay for its purchases. It's not a bank foreclosure but it seems terribly close. I own a lot of LNCO so I hope I'm wrong. GLTA
This isn't really "breaking" news that the panhandle assets are going to be divested, but depending on the source, it may be a sign that consummation of the deal may not be too terribly far off. An auction rather than a direct sale is also interesting.
Worth noting is that Wolfcamp II is not mentioned as much. The company appears to still be drilling heavily in an attempt to delineate the acreage. This is looking more and more like a late '14 or '15 event.
Yeah, what could it mean? Maybe they haven't been able to find buyers, and they are facing a deadline due to the Devon deal, or maybe there are too many buyers, and they want simplify the negotiating process rather than go back and forth with them all. Curious.
Well, none of it will go towards reducing existing debt. They need the money to close on the Devon deal. They have a temporary financing commitment, but that will only be tapped if they have to close on that before closing on the sales.