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Linn Energy Acquires Natural Gas Assets

BPs Second Sale to Linn

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By Brianna Panzica
Monday, June 25th, 2012

The natural gas survival-of-the-fittest continues.

With prices at a 10-year low, some companies are being forced to sell shale assets and natural gas fields. Chesapeake Energy (NYSE: CHK) announced sales earlier this month.

Now British oil company BP (NYSE: BP) is doing the same. And an American company is picking up its losses.

Linn Energy (NASDAQ: LINE), based in Houston, Texas, is planning to purchase BP's natural gas holdings in Jonah Field in Wyoming.

The companies agreed on a price of $1.03 billion for the assets, which include 73% gas, 23% natural gas liquids, and 4% oil according to Bloomberg.

Linn's natural gas production, after the acquisition, will increase by 145 million cubic feet a day.

Jonah Field is located in the Green River Basin, which stretches across Utah, Wyoming, and Colorado and holds an estimated 730 billion barrels of recoverable shale oil.

From The New York Times:

“This acquisition provides Linn with a significant operated position in the Green River Basin of Wyoming and the opportunity to add employees to our staff who have hands-on experience with operations in the Jonah Field,” Mark E. Ellis, Linn's chairman and chief executive, said in a statement. “The long-life, low-decline characteristics of the Jonah Field make this asset an excellent fit for us.”

Linn plans to close the deal by July 31. It will mark the second natural gas deal with BP in 2012, following a previous $1.2 billion purchase of Kansas' Hugoton Basin acreage.

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The company also has stakes in North Dakota's Bakken shale, the Permian Basin in Texas and New Mexico, Texas' Overton Field, Michigan's Antrim Shale, the Los Angeles Basin, and the Powder River Basin in Wyoming.

Linn is doing well for itself, particularly in the hostile environment created by low natural gas prices. Kevin Smith, an analyst from Raymond James, told MarketWatch:

“We believe the acquisition market will likely be tremendous over the next 12 to 24 months providing the opportunity for Linn Energy to do a significant amount of highly accretive acquisitions.”

The company had 3.4 trillion cubic feet of reserves as of December 31, 2011 and maintains an enterprise value of $13.1 billion.

Also on Monday, Linn Energy's Linn Co LLC filed for initial public offering, looking to trade on the NASDAQ under “LNCO” and aiming to raise $1 billion.

Linn Energy was down 2.28% to $35.27 on Monday afternoon.

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