Linn Energy Sells California Acreage, Bringing May Divestitures To $844 Million

Linn Energy Inc. will sell its interests in California’s San Joaquin Basin as part of an ongoing house cleaning effort that will clear the way for a concentrated focus in the Midcontinent.

Linn said May 23 it will sell a portion of its South Belridge Field—about 500 net acres with 3,000 barrels of oil equivalent per day (boe/d) of average production—to an undisclosed buyer for $263 million. The assets also include proved developed reserves of 11.7 MMboe and a proved developed PV-10 value of $168 million.

Combined with an earlier transaction agreement in May, Linn is on track to close the month with agreements to sell $844.5 million in assets.

About $21 million in second-half 2017 capital will be redeployed. Linn forecast full-year adjusted EBITDAX associated with the properties at $30 million.

The California divestiture is part of an ongoing trimming of assets the company considers noncore as it more aggressively targets the Scoop/Stack/Merge plays in Oklahoma, as well as other regions.

Linn continues to right its portfolio since it exited from bankruptcy protection in February. The company has transformed from an MLP with assets scattered across the Lower 48 to an E&P company intent on exploiting its Oklahoma Merge assets in western Oklahoma and other areas.

Mark E. Ellis, Linn’s president and CEO, has said that in addition to the Oklahoma plays, Linn is pursuing other emerging horizontal plays in the Midcontinent, Rockies, North Louisiana and East Texas.

Overall, Linn holds 2.6 million acres across the U.S., including about 3,000 total acres in California. The company is also offering divestment packages in the Permian Basin, South Texas and the Williston Basin.

On May 2, the company unexpectedly agreed to sell natural gas assets in the Jonah and Pinedale fields in Wyoming to Jonah Energy LLC for $581.5 million.

During a May 11 earnings call, Ellis said that while the Wyoming assets were not part of the company’s planned sales, the deal aligned with its overall strategy.

“We continue to market the previously announced non-core asset sales and there is significant interest in each of the packages,” he said.

The California asset transaction is expected to close by July 31, Linn said. The transaction is subject to satisfactory completion of title and environmental due diligence and other closing conditions.

Tudor, Pickering, Holt & Co. and Jefferies LLC acted as co-financial advisers and Kirkland & Ellis LLP was the company's legal counsel during the transaction.

Darren Barbee can be reached at dbarbee@hartenergy.com.