Linn Energy LLC had the motive—but until its recent partnership with Quantum Energy Partners, lacked the means and opportunity to make some real steals.

Quantum handed Linn Energy and LinnCo LLC up to $1 billion in spending power, a sign of faith in Linn from one of its founding investors.

The infusion of capital gives Linn the wherewithal to survey the landscape of distressed oil and gas companies and, the hope is, make a financial killing.

The equity partnership is another innovative step in the evolution of upstream MLP financing structures. Quantum has agreed to initially commit equity capital to fund deals as well as development of oil and gas assets. Linn will have the ability to participate in all acquisition opportunities with a direct working interest ranging from 15% to 50%.

Oil and gas properties will be managed by Linn. Additionally, Linn has the ability to earn a promoted working interest and will have a right of first refusal to acquire the properties. The agreement brings the total potential size of the alliance to more than $2.5 billion when combined with the ability to leverage the acquisition company, known as AcqCo, and Linn’s purchase of a direct working interest.

“Once again, Linn has created a unique structure that will greatly benefit the upstream MLP,” said Kevin Smith, analyst, Raymond James. “First, this transaction helps incrementally de-risk Linn’s acquisition story by providing dropdown potential. This structure allows Linn to participate in both larger deals and deals that might not have fit the conventional upstream MLP asset profile. Lastly, this structure potentially provides steady, accretive cash flow through the promote structure.”

Mark E. Ellis, chairman, president and CEO of LinnCo, said Linn and Quantum have a long history of working together.

“As the founding investor in Linn and a leading private capital provider to the energy sector that also participated in the formation of two other upstream MLPs, Quantum is uniquely qualified for this new acquisition alliance,” Ellis said. “Based in Houston, Quantum brings considerable size and scale to source and fund acquisitions, along with the flexibility and responsiveness to be very effective partners.”

S. Wil VanLoh Jr. and Dheeraj Verma of Quantum said, “We believe that energy companies looking to divest sizeable or complex assets in today’s market have limited choices. Our partnership with Linn will truly create a new strategic buyer for these assets, one that has the capital resources and speed of a financial buyer but the operational expertise and workforce of a strategic acquirer.”

The agreement creates a drop-down entity in which assets can be purchased and harvested on an ongoing basis. Other advantages to the financial arrangement are the potential for more accretion of cash flow per unit as a result of the promote structure, benefiting Linn unitholders.

The partnership will be focused on conventional and unconventional resource development opportunities across the U.S.

So far, in 2015, E&P companies are in a wait-and-see mode on deals. Depressed economics in the oilfield have translated into confusion in the A&D marketplace.

Deal activity has declined dramatically, and spending in first-quarter 2015 is about 85% lower than fourth-quarter 2014. A&D should pick up in second-half 2015; however, given the appetite for the best assets, bargain hunting will be difficult, Wood Mackenzie said in a March 24 report.

In first-quarter 2015, deal values withered. Wood Mackenzie expects the Lower 48 M&A market to remain depressed until participants reach consensus on oil price and appropriate financial metrics.

Still, U.S. shale oil has shown it’s at the top of the non-OPEC hierarchy, said Subash Chandra, analyst, Guggenheim. Eventually, it should attract investment.

“U.S. shale oil is no longer a science experiment or a niche product, rather it is the only source of short-cycle, non-OPEC oil growth,” Chandra said.

Success in the U.S. has failed to be replicated in other countries and shale plays have demonstrated equal or better production capacity than deepwater projects.

“We expect M&A interest to pick up as buyers acknowledge the resource potential, scalability, short-cycle, fiscal stability and low political risk of the U.S.,” Chandra said.

Smith expects the oil and gas acquisition market to be very active in the second half of the year, with the Linn/Quantum pact being put to work before the end of 2015.

“We view it as a strong positive that a leading private-equity company is willing to make a multiyear commitment to Linn,” he said.

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