2008-09-02-2008-04-15-2008-07-01

Bought 152,000 net Marcellus shale acres in PA WV, gaining 145 Bcfe proved, 25 MMcfe/d.

XTO Energy Inc., Fort Worth, Texas, (NYSE: XTO) has completed its acquisition of producing properties, leasehold acreage and infrastructure in the Marcellus shale in western Pennsylvania and West Virginia from the MLP Linn Energy LLC, Houston, (Nasdaq: LINE) for $600 million. The sale represents an exit from the Appalachian Basin for Linn. Linn reported proved reserves of approximately 197 billion cubic feet equivalent (99% gas) as of Dec. 31 as estimated by a third party. XTO reported proved reserves as estimated by internal engineers to be 145 billion cubic feet equivalent (75% proved developed) from the shallow Mississippian and Devonian reservoirs. Production is 25 million cubic feet equivalent per day. The assets include 152,000 net acres with 99,000 acres in West Virginia and 53,000 in Pennsylvania. Of those, 132,000 acres are held by production. The pipeline and gathering infrastructure of more than 1,000 miles is valued at about $50 million. XTO expects average well reserves to be greater than 2 billion cubic feet equivalent with initial producing rates of 2 million to 3 million cubic feet per day by applying horizontal drilling and completion techniques, with a total resource potential of 2 trillion to 4 trillion cubic feet equivalent. XTO chairman and chief executive Bob R. Simpson says, "This acquisition provides XTO an ideal opportunity to stake a foothold in the emerging Marcellus shale play of the Appalachian region. The expansive leasehold is anchored in the right locations, where we anticipate prolific shale potential. The producing properties generate free cash flow which we will deploy in our shale development campaign. Also, the operational team already in place brings the experience, expertise and manpower to support XTO's long-term commitment to the basin." XTO president Keith A. Hutton says, "Our confidence in the Marcellus shale is based on several key factors: a rigorous evaluation of the geology and its associated resource, the horizontal and vertical well results from multiple operators and our ability to expedite the pipeline infrastructure needed to re-develop the region. From our technical perspective, the Marcellus shale resembles the Fayetteville shale, containing similar gas-in-place potential and comparable producing metrics." Linn will use the proceeds to reduce debt. Following the sale Linn has approximately $700 million available under its credit facility. Linn chairman and chief executive Michael C. Linn says, "We have achieved another important step in optimizing our asset base to focus on low-risk development opportunities. The closing of the Appalachian sale and the anticipated closing of the Verden property sale, as well as the recent bond offering, will provide significant financial flexibility that can be used to fund future growth opportunities." Linn is selling assets in the Verden area in Oklahoma to Tulsa, Okla.-based Laredo Petroleum Inc., a privately held portfolio company of Warburg Pincus, for $185 million. Lehman Brothers Inc. was advisor to Linn. The effective date is April 1. Standard & Poor's Ratings Services affirmed its 'BBB' corporate credit rating on XTO with a stable outlook. S&P assigned the rating to the company's $2 billion in unsecured bonds. The offering consists of $400 million in five-year notes, $800 million in 10-year notes and $800 million in 30-year bonds. S&P analyst David Lundberg says, "Proceeds will be used to refinance outstanding commercial paper, to partly fund pending acquisitions, and for general corporate purposes."