Houston-based LINN Energy will acquire BP's Jonah field properties in the Green River Basin of southwest Wyoming for $1.025 billion, Linn said Monday.
Under the agreement, LINN will acquire BP's operations center in Sublette County, Wyoming and all of its working interest in approximately 260 operated wells with recent net BP natural gas production of 80 million standard cubic feet equivalent of gas a day (MMscfe/d), and non-operated wells with recent net BP production of 66 MMscfe/d.
BP's upstream production operations in Moxa and Wamsutter, Wyoming are unaffected by the sale.
LINN Chairman, President and CEO Mark E. Ellis said the acquisition provides LINN with a significant operated position in the Green River Basin and the opportunity to add employees who have hands-on experience with operations in the Jonah field.
"The long-life, low-decline characteristics of the Jonah field make this asset an excellent fit for us," said Ellis, noting that the properties are expected to provide approximately 145 MMcfe/d of liquids-rich natural gas production.
Fifty-five percent of this production will be operated by LINN.
"Furthermore, we expect to asset to be immediately accretive to distributable cash flow per unit, and it holds significant future drilling inventory," said Ellis. "Consistent with our strategy, we have hedged 100 percent of the expected net oil and natural gas production for approximately six years through 2017."
LINN noted that its cash flow is notably more protected from oil and natural gas price uncertainty than in its C-corp. and upstream master limited partnership peers, according to a presentation on its website.
The acquisition is expected to close on or before July 31, 2012, and will be financed with proceeds from borrowings under its revolving credit facility.
Including the BP acquisition, LINN has announced or closed nearly $3 billion of acquisitions so far this year. LINN has pending or closed acquisitions for assets in East Texas, the Hugoton field in southwest Kansas, and the Salt Creek field in Wyoming, and has an inventory of low risk, liquids rich development opportunities in U.S. onshore plays including the Bakken, Granite Wash, and Wolfberry.
LINN expects the acquisition to provide the company with proved reserves of approximately 730 billion cubic feet equivalent – including 73 percent natural gas, 23 percent natural gas liquids and 4 percent oil – and a low decline rate of 14 percent.
The company has also identified resource potential of approximately 1.2 trillion cubic feet equivalent from approximately 650 future drilling locations. The company anticipates approximately 750 gross wells to be drilled on over 12,500 net acres.
BP Group Chief Executive Bob Dudley said in a statement the sale would allow BP "to realize the value of the mature Jonah assets and reinvest in higher growth opportunities in BP's North America gas business and elsewhere."
"We are actively managing our portfolio of assets and businesses worldwide, focusing our investment on future growth in BP's areas of strength," Dudley commented.
Since early 2010, BP has divested approximately $24 billion in assets. This total is expected to rise to $36 billion by the end of 2013.
BP said in a statement that its U.S. onshore upstream operations are an integral part of its business and the company continues to look at opportunities for growth over the long-term. These opportunities include the company's announcement in March that it would enter the Utica shale play in Ohio through a lease for 80,000 acres.
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