- Frenetic search for survivors as 91 feared dead in tornado-hit Oklahoma |
- Israel fires back at Syria after gunshots at its troops
- Drop in U.S. underground water levels has accelerated -USGS
- Dollar firms as Fed suspense builds, shares off highs |
- IRS officials back on Capitol Hill hot seat over targeting
UPDATE 3-Linn buying gas assets from BP for $1 bln
* To buy Jonah Field properties in Wyoming
* Expects deal to immediately add to distributable cash flow
* Says to fund deal with borrowings
* Affiliate Linn Co LLC files for IPO
June 25 (Reuters) - Linn Energy LLC will buy natural gas acreage in southwest Wyoming from BP America Production Co for $1.03 billion, its second such deal with the British company this year at a time when prices for the fuel have hit decade-lows.
Weak prices have prompted several companies to sell off natural gas properties, presenting a bargain for those willing to wait for a turnaround.
"Linn is very opportunistic and they are in a very good position to acquire assets from forced sellers," said National Securities analyst Boris Pialloux.
Linn earlier this year bought natural gas assets in Kansas from BP for $1.2 billion.
"We are commodity agnostic when it comes to acquisitions," Linn Chief Executive Mark Ellis said in an emailed statement, adding that the company was continuously on the lookout for acquisitions. Linn has spent $3 billion on deals so far this year.
BP, which is raising billions of dollars to help fund the cost of the 2010 Gulf of Mexico oil spill, is selling all of its working interest in about 260 wells among other assets.
Linn, as a limited liability company, has a corporate structure that allows it to reduce its tax burden by passing on most of its cash flow to unitholders. This also provides a greater access to capital.
"Multiples for Linn are much higher than that of corporations. If they are going to issue stock, they have a much more expensive currency to buy assets," said Pialloux.
Houston-based Linn's distributions have more than doubled over the past six years. It paid $2.70 per unit in 2011.
Linn said the latest BP deal is expected to immediately add to distributable cash flow per unit.
Separately, Linn Co LLC, a company that will hold no assets other than Linn Energy units, filed with U.S. regulators to raise up to $1 billion in an initial public offering of shares.
The IPO will help the company get investment from institutional investors, who do not buy MLP stocks for tax- related concerns, said Jerry Swank, founder of Swank Capital.
Swank Capital's Cushing MLP Asset Management LP is Linn Energy's 6th biggest shareholder, with a 0.86 percent stake, according to Thomson Reuters data.
NAT GAS ASSETS
The BP properties in the Jonah Field, located in the Green River Basin, have proved reserves of about 730 billion cubic feet equivalent, of which 73 percent is natural gas and 23 percent natural-gas liquids.
"Linn paid $1.40/thousand cubic feet of natural gas equivalent (mcfe) of reserves versus year-to-date upstream master limited partnership average of $2.40/mcfe," Robert W Baird & Co analyst Ethan Bellamy wrote in a note to clients.
The company said it has hedged all of the acquired natural gas production through 2017.
Linn said it expected to finance the BP deal, which will close by July 31, with borrowings under its revolving credit facility.
Shares of the company, which has a market value of $7.20 billion, fell more than 2 percent to $35.26 on the Nasdaq.
- Tweet this
- Share this
- Digg this