Linn Energy Inc. is having an unstoppable May, crossing the $900 million mark in divestments—with one day remaining in the month.

Denbury Resources Inc. (NYSE: DNR) said May 30 it agreed to buy Linn’s Salt Creek Field in Wyoming. Denbury will pay $71.5 million to acquire 23% nonoperated working interest in the CO₂ flood assets from Linn subsidiaries.

The acquisition pushes Denbury’s indebtedness up by an additional 7% and increases the importance of company asset sales. Linn, at the same time, will see its debt eliminated through another May divestiture.

Linn has announced three agreements this month to sell noncore assets for $916 million. Overall, the company is offering for sale roughly 248,000 net acres in the Williston and Permian basins and elsewhere.

Denbury will initially use its bank line to fund the deal but said it will offset the cost through the “sale of non-productive surface acreage ideally suited for commercial development in the Houston area, which Denbury is currently preparing to market.”

The Wyoming properties consist of about 5,000 net acres in the Salt Creek Field and Linn forecast full-year adjusted EBITDAX associated with the properties of about $5 million. In the second half of 2017, the company’s budgeted $4 million in capital for the properties will be redeployed for the development of projects or added as additional cash on the balance sheet, Linn said.

“The Salt Creek sale marks a milestone in the ongoing transformation of Linn from a highly levered production-based MLP to a streamlined growth-oriented enterprise,” Linn CEO Mark Ellis and Chairman Evan Lederman said in a joint statement.

After the closing of sales announced in May, Linn will have “extinguished all remaining outstanding debt,” the company said, noting that it had $8.4 billion in outstanding debt at the end of 2015. Linn exited bankruptcy reorganization in February.

For Denbury, the deal does the opposite. At the close of the deal, the company’s borrowings will rise to 41% of its $1.05 billion revolver, said David Deckelbaum, an analyst at KeyBanc Capital Markets.

As of early May, Denbury’s interest expense for first-quarter 2017 ($27 million) was about the same as its general and administrative expenses ($28 million).

“If management’s [commercial] asset sale follows through, we estimate the company exiting [year-end 2017] with about 38% drawn on its revolver,” Deckelbaum said.

Prior to the deal, Denbury had about $623 million in liquidity.

However, Deckelbaum said the acquisition should help reverse the company’s production decline and setup for production growth in 2018.

Denbury has received breathing room from lenders, but “needs to lower debt in absolute terms, in our view,” said Timothy Rezvan, an analyst at Mizuho Securities USA LLC. Overall, the acquisition appears to be leverage neutral, he said.

“A cursory review of our model suggests a $20 million annual uplift to EBITDA from the acquisition, excluding any benefit from capital projects designed to grow production,” Rezvan said.

The deal is Denbury’s second for nonoperated assets in 2017. In March, Denbury formed a $16 million joint venture for 48% working interest in the West Yellow Creek Field in Mississippi.

The Salt Creek Field builds scale in the heart of Denbury’s core Rockies region, said Chris Kendall, president and COO.

“The acquisition builds on our goal of resuming production growth by 2018, and its attractive price should improve our credit metrics in the near term, with the opportunity for additional enhancements in the future,” he said.

The transaction is expected to close in the second quarter—possibly by late June—with an effective date of March 1.

CIBC Griffis & Small and Jefferies LLC acted as co-financial advisers for Linn and Kirkland & Ellis LLP was its legal counsel.

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

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