Permian Basin Strategic Alternatives
LINN Energy has retained RBC Richardson Barr to assist with evaluating multiple strategic alternatives to maximize value for the Midland Basin portion of its Permian position. Alternatives include potential asset trades, a cash sale of the position, pursuing an active drilling program and joint ventures. LINN's current position for prospective horizontal Wolfcamp consists of approximately 55,000 net acres with approximately 630 gross operated potential locations with a 95 percent working interest, 87 percent of which are held by production. Additionally, the Company has approximately 455 gross potential locations with approximately 50 percent working interest, which will require forming a unit. The number of prospective horizontal locations primarily includes the Wolfcamp A and B benches. The potential for future delineation of additional benches could provide further upside to the Company's estimated drilling locations. Of LINN's total current Permian production of approximately 26 MBoe/d, 17 MBoe/d is associated with 1,275 wells in the Midland Basin with an 88 percent working interest.
Trading some or all of LINN's Midland Basin position for long-life mature producing properties would potentially be accretive to cash available for distribution. Value could be realized by trading prospective acreage for current cash flow, trading current vertical production for lower declining production, or by reducing capital intensity in the Midland Basin. In order to facilitate multiple dialogues and ranges of trade size, the Company has divided its acreage and production for potential trades into several distinct geographic packages.
Another viable alternative would be for LINN to purchase an asset while subsequently selling some or all of its Midland Basin position in an IRC 1031 "Like-Kind-Exchange", which would minimize or eliminate any tax liabilities typically associated with selling an asset. Additionally, this option would provide a broader universe of potential buyers while giving LINN the flexibility to work with different parties in each transaction.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts