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LINN Energy in $525M Permian Deal

Zacks Equity Research

Independent oil and gas company, LINN Energy LLC (LINE), announced that it has inked a deal worth $525 million to purchase properties in the oil and gas abundant Permian Basin.    

LINN Energy expects the transaction to be complete by the fourth quarter and contribute towards increasing its production levels. The company plans to fund this purchase through its revolving credit facility and a secured term loan of $500 million.
Spread over 6,250 net acres, the Permian Basin land holds approximately 124 producing wells and 30 million barrels of oil equivalent (MMBoe) of proved reserves. The property also has a 24 MMBoe waterflood potential.

Management believes that the acquisition will add value to the company’s existing portfolio and provide wider oil exploration and drilling opportunities. The Permian Basin properties will add 300 proved low-risk infill drilling options and approximately 4,800 barrels of oil per day (BOE/d) for the first year to its current holdings.
A day prior to this announcement, LINN Energy had declared that it has made progress to acquire Berry Petroleum Co. (BRY) in a move to increase reserves and cash flow. Houston-based LINN Energy had proposed the purchase of Berry Petroleum in February. The closure is pending, as the U.S. Securities and Exchange Commission probe into LINN Energy’s hedging strategy is still ongoing.

However, the news of progress on the Berry acquisition led to a 12.8% jump in the shares of LINN Energy to $27.90 on Sep 11. After the announcement of the Permian Basin deal, the shares rose initially but settled at 3 cents lower than the previous day when the market closed on Sep 12.

LINN Energy currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, one can consider other energy explorers such as Range Resources Corporation (RRC) and Carrizo Oil & Gas Inc. (CRZO) as good investment opportunities. Both these stocks currently sport a Zacks Rank #1 (Strong Buy).  

Read the Full Research Report on RRCRead the Full Research Report on LINERead the Full Research Report on CRZORead the Full Research Report on BRYZacks Investment Research