Jonah Energy to buy Linn’s Jonah, Pinedale field interests for $581.5 million
Jonah Energy LLC, Denver, has agreed to acquire Houston-based Linn Energy Inc.’s interests in western Wyoming for $581.5 million. The move for Linn comes as part of its operational transformation after emerging from bankruptcy earlier this year.
The properties comprise 27,500 total net acres—80% of which is undeveloped—including 16,000 net acres in the Jonah and Pinedale Anticline fields. First-quarter net production on the acreage averaged 129 MMcfd of gas equivalent and proved reserves totaled 384 bcfe.
Pro forma for the deal, which is expected to close in the second quarter, Jonah Energy says it will produce 450 MMcfed net from 2,100 producing wells across 145,000 net acres within Jonah and Pinedale fields and the adjacent Normally Pressured Lance (NPL) area.
The firm expects to begin development activity on the acquired acreage during the second half with three rigs planned by early 2018. “We will implement a robust development program on the acquired assets, which have seen minimal investment over the last several years,” said Tom Hart, Jonah Energy chief executive officer.
Jonah Energy was formed in 2014 with the $1.8-billion acquisition of producing assets at Jonah field in Sublette County, Wyo., from Encana Oil & Gas Inc. (OGJ Online, May 12, 2014). The firm’s investor group is led by TPG Capital LLC and includes EIG Global Energy Partners and management.
New era under way for Linn
Linn’s restructuring ended with a split from Berry Petroleum Co., the company with which it merged in 2013, and the elimination of more than $5 billion in debt (OGJ Online, Mar. 1, 2017).
Linn forecasts full-year unlevered free cash flow of $60 million associated with the properties it’s selling to Jonah Energy. The firm had budgeted $16 million of capital for second-half development on the acreage. Proceeds from the sale are expected to be used to reduce outstanding borrowings under Linn’s revolving credit facility and term loan.
Mark E. Ellis, Linn president and chief executive officer, said, “We are aggressively pursuing higher return opportunities in the SCOOP-STACK-Merge play where we are increasing rig activity and building out our midstream business. In addition, we are pursuing other emerging horizontal plays in the Midcontinent, Rockies, North Louisiana, and East Texas.”
Linn’s position now covers 2.6 million net acres that are 98% held by production, including 185,000 net acres in SCOOP-STACK-Merge, where the firm operates a 60-MMcfd refrigeration plant with expansion capability.
Linn Chairman Evan Lederman noted the “sale also marks the first step of transitioning Linn from a conventional production-based [master limited partnership] to a streamlined growth-oriented enterprise.”
The firm’s new business plan “includes continuing the previously announced sale of noncore assets,” Lederman explained. After it emerged from bankruptcy, Linn said it would market 130,000 net acres in South Texas, 90,000 in the Permian, 20,000 in the Williston, 5,000 in Salt Creek, and 3,000 in California.
Contact Matt Zborowski at [email protected].