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Linn Energy LLC
BP Plc (BP/), the energy producer that’s disposing of assets to help pay for the 2010 Gulf of Mexico oil spill, agreed to sell its stake in Wyoming natural-gas fields to Linn Energy LLC (LINE) for $1.03 billion.
The deal, which includes the Jonah and Pinedale operations, brings BP’s divestitures to about $24 billion since the start of 2010, with the target remaining at $38 billion by the end of next year, the London-based company said in a statement today. The sale includes proved reserves equivalent to about 730 billion cubic feet of gas.
“This sale will allow us to realize the value of the mature Jonah assets and reinvest in higher growth opportunities in BP’s North America gas business and elsewhere,” Bob Dudley, BP’s chief executive officer, said in a statement. It’s the second time this year that Houston-based Linn has reached an agreement to buy fields from BP.
BP is selling assets after setting aside about $37 billion to pay for the 2010 explosion at its Macondo well in the Gulf of Mexico, the biggest offshore oil spill in U.S. history. The company said June 1 that it plans to sell its half of TNK-BP, the Russian venture that accounts for about a quarter of its global output. It also plans to sell two refineries in the U.S. by the end of the year.
This is the fourth acquisition this year by Linn, which was formed by Michael C. Linn and private-equity firm Quantum Energy Partners in 2003. The company bought BP properties in Kansas for $1.2 billion in March. Linn has announced the most U.S. exploration and production purchases in 2012, with four transactions valued at $2.4 billion, including the agreement today.
For Linn, which has increased production (LINE) more than fourfold in the past five years, the Wyoming properties are expected to add the equivalent of 145 million cubic feet a day of gas production, the company said in a separate statement. The field holds 73 percent gas, 23 percent natural gas liquids and 4 percent oil.
BP fell 1.3 percent to 402.05 pence at the close. Linn fell 2.4 percent to $35.22 at the close in New York, the biggest decline since Feb. 3.
“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,” said Linn Chairman and Chief Executive Officer Mark Ellis.
Linn has hedged 100 percent of the expected production from the field for approximately six years through 2017. It expects the purchase to close by July 31 and plans to finance the acquisition with proceeds from borrowings under its revolving credit facility.
Barclays Plc, BMO Capital Markets and RBC Richardson Barr were Linn’s financial advisers on the purchase.
Separately, Linn filed with the U.S. Securities and Exchange Commission today seeking to sell shares in a new company that will hold its stock and help it raise money for acquisitions. The new entity, Linn Co LLC, will be taxed as a corporation, giving it access to funds from institutional investors who currently don’t buy Linn Energy because of its partnership status.
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