The joint venture (JV) between FourPoint Energy LLC and EnerVest Ltd. has made its largest move this year, acquiring from Linn Energy LLC (NASDAQ: LINE) and LinnCo LLC (NASDAQ: LNCO) their entire Granite Wash and Cleveland plays located in the Texas Panhandle and western Oklahoma.

The JV said Oct. 3 that it signed a purchase and sale agreement to acquire Linn Energy’s oil and gas properties and related midstream assets in the Western Anadarko Basin for $1.95 billion.

LinnCo said it will use the proceeds to pay its own acquisition bills. It also sold its Permian holdings, the company said Oct 3.

The FourPoint-EnerVest JV picks up assets that include interest in 1,358 producing wells primarily in the Granite Wash, Tonkawa, Cleveland and Marmaton formations. Daily net production is about 195 million cubic feet equivalent per day (MMcfe/d). The assets cover more than 145,000 net acres throughout western Oklahoma and the Texas Panhandle and are 97% HBP.

The joint venture, formed earlier this year, already has spent $1.2 billion gross capital in the Mid-Continent.

For LinnCo, the company announced a $2.3 billion day of asset sales and added two deals to its current load of seven concurrent transactions, said Ethan Bellamy, senior analyst with Baird Energy.

The company also said Oct. 3 that it’s selling its Wolfberry positions in Ector and Midland counties, Texas, in the Permian Basin for $350 million. Proceeds from the sales are expected to finance the company's $2.3 billion acquisition of assets from Devon Energy Corp. (NYSE: DVN), which closed in August 2014.

LinnCo had planned to sell the Granite Wash and Cleveland assets to help pay the Devon costs. In its deal with the JV, it let go of about 145,000 net acres, 195 MMcfe/d of current production, 755 Bcfe of year-end 2013 proved reserves and related midstream facilities. Linn is running a four-rig drilling program and planned to spend $210 million toward the assets in 2014.

The Permian Basin properties include approximately 7,200 net acres, 4.6 MBoe/d of current production and 19 MMBoe of year-end 2013 proved reserves. Linn is running a two-rig vertical drilling program and planned capex of about $95 million on the assets in 2014.

“Early in 2014, we outlined four keys to success at Linn: realize value for the Midland Basin position; continue to make accretive acquisitions; reduce capital intensity while increasing efficiency; and improve credit metrics," said Mark E. Ellis, chairman, president and CEO. "We believe today's announcement is a positive development in achieving these objectives. As we enter into the second half of the year, we remain committed to these important goals."

George Solich, president and CEO of FourPoint Energy, said its deal with LinnCo materially boosts the scale of the JV’s acreage position, which in early September included 14 counties in Texas and Oklahoma’s liquids-rich core area.

“The Linn assets will transform the joint venture’s current operatorship profile within producing wells, add a significant inventory of operated upside locations, provide access to higher value oil and gas markets and afford control of capital allocation,” Solich said. “Additionally, we have identified several cost synergies and strategic opportunities that will be pursued as we develop the asset base.”

The acquisition positions the joint venture with a large-scale footprint in a premiere multi-pay resource play, where the team has substantial core competencies established over a decade of operations in the basin.

FourPoint, based in Denver, noted that along with its upstream assets, it will acquire a wholly owned midstream asset consisting of more than 170 miles of gas gathering and compression systems, liquid stabilization, associated water supply and disposal infrastructure, and an oil terminal facility in Wheeler County, Texas.

Pro forma for the acquisition and prior to customary post-closing adjustments, the joint venture will boast an acreage position of more than 325,000 net acres in its established area of mutual interest with net production estimated to exceed 315 MMcfe/d. FourPoint and EnerVest expect strong growth while spending within free cash flow and continuing to exploit the multi-year drilling inventory associated with the combined asset base.

The JV’s acquisition is expected to close on or before Dec. 15.

Jefferies LLC acted as financial adviser to FourPoint Energy and EnerVest in connection with the transaction.

RBC Richardson Barr, Scotia Waterous and Wells Fargo were financial advisers to Linn during the Granite Wash and Cleveland play transaction.

RBC Richardson Barr acted as the sole financial adviser to Linn during the Permian Basin transaction.

Comments