Why did LINN Energy acquire oil and gas assets from Devon Energy? (Part 4 of 4)
LINN Energy focuses on acquiring and developing oil and gas assets
The two most focused strategies of LINN Energy (LINE) are to grow through acquisition of long-life, high quality properties and efficiently operate and develop acquired properties. With this goal, LINE has been making a continuous effort to build a solid portfolio of assets in the Rockies, the Mid-Continent, the Hugoton Basin, California, the Permian Basin, Michigan, Illinois, and east Texas. In order to understand the effect of its recent purchase of DVN’s oil and gas assets, we have discussed some of its recent acquisitions.
LINE’s previous acquisitions
On December 16, 2013, the company acquired Berry for ~$4.6 billion. Berry’s principal reserves and producing properties are located in California—the San Joaquin Valley Basin and Los Angeles Basin, Texas—the Permian Basin and east Texas, Utah—the Uinta Basin, and Colorado—the Piceance Basin. The acquisition included ~1,408 billion cubic feet equivalent of proved reserves and had average daily production of ~267 million cubic feet per day. At December 31, 2013, Berry had ~3,400 gross productive wells and more than 200,000 net acres.
In October, 2013, LINE acquired certain oil and natural gas properties located in the Permian Basin for a total consideration of ~$528 million.
In July, 2012, LINE acquired oil and natural gas properties in the Jonah Field located in the Green River Basin of southwest Wyoming from BP for ~$988 million.
In May, 2012, LINE completed the acquisition of certain oil and natural gas properties located in east Texas for ~$164 million.
In March, 2012, LINE acquired oil and natural gas properties and the Jayhawk natural gas processing plant located in the Hugoton Basin in Kansas from BP for ~$1.17 billion.
Why do the acquisitions help LINE grow?
The acquisitions helped company’s reserve base grow significantly. Since January 1, 2009, LINE completed 35 acquisitions in oil and natural gas properties and related midstream assets. Total acquired proved reserves from the acquisitions were ~4.7 trillion cubic feet equivalent with acquisition costs of ~$1.97 per thousand cubic feet. LINE has a strategy to maximize efficiency and minimize costs of the acquired properties through continuous development. For 2014, it estimates its total capital expenditures in oil and gas properties, excluding acquisitions, will be approximately $1.6 billion, including approximately $1.55 billion. It’s expected that the recently acquired properties would also add to its proved reserves and substantially increase its production.
The recent acquisitions of Devon assets will enable LINE to augment its existing asset base in the Mid-Continent, Rockies, and east Texas, as well as add new bases in south Texas and north Louisiana.
The acquisition of oil and gas properties of Devon Energy Corporation (DVN) by LINN Energy LLC (LINE) is expected to be positive for both the companies as it strengthens the long-term business strategies of the companies. LINE is a component of the iShares Select Dividend ETF (CVY). DVN is component of the Energy Select Sector SPDR (XLE) and the Vanguard Energy ETF (VDE).
Browse this series on Market Realist:
- Part 1 - Overview: LINN Energy acquired assets from Devon for $2.3 billion
- Part 2 - Why the recent sale fits into Devon’s long-term business strategy
- Part 3 - Why LINN Energy is interested in the acquisition from Devon
- Oil, Gas, & Consumable Fuels
- Mergers, Acquisitions & Takeovers
- Devon Energy
- LINN Energy