Linn Energy Reaps $2.3B From Texas, Okla. Land Sales

Linn Energy LLC said Friday it's agreed to sell oil and gas properties in Texas and Oklahoma in a pair of deals worth a combined $2.3 billion, the proceeds of which will help fund Linn's recent $2.3 billion purchase of gas development assets from Devon Energy Corp.

Houston-based Linn said it's agreed to sell its entire position in the gas-rich Granite Wash and Cleveland plays located in the Anadarko Basin of the Texas Panhandle and western Oklahoma to privately held institutional affiliates of EnerVest Ltd. and its joint-venture partner FourPoint Energy LLC for $1.95 billion. Linn has also agreed to sell positions in the oil-rich Permian Basin's Wolfberry play to private-equity backed Fleur de Lis Energy LLC for $350 million.

Both deals are expected to close in the fourth quarter of this year. Linn said proceeds from the sales will be used to finance its purchase of five gas development operations from Devon, a $2.3 billion deal which closed in August.

"One of our goals for 2014 was to maximize value for our Midland Basin and Granite Wash assets in order to reduce the capital intensity and decline rate within our portfolio," Linn Chairman, President and CEO Mark E. Ellis said in a statement Friday. "We believe today's announcements largely accomplish this goal."

The Granite Wash and Cleveland properties sold include approximately 145,000 net acres and 755 billion cubic feet of gas equivalent in proved reserves as of the end of 2013, according to Linn. The company said it's currently producing 195 million cubic feet of gas equivalent per day.

EnerVest and FourPoint are also picking up a 170-mile gas gathering system, associated infrastructure and an oil terminal facility. EnerVest said the acquisition will boost the joint venture's acreage in the area to 325,000 net acres and its daily production to 315 million cubic feet of gas equivalent per day.

"With this acquisition we are almost tripling our position in the Anadarko Basin," EnerVest CEO John B. Walker said in a statement Friday. "Once we have closed this acquisition we will have spent more than $3 billion acquiring properties in the mid-continent region together with FourPoint within the last year. We look forward to continued growth in the area."

EnerVest also said it had sewed up its $805 million purchase of Loews Corp.'s HighMount Exploration & Production LLC, which beefs up the company's operations in the Permian Basin and Oklahoma. EnerVest said it's also agreed to unload its position in the Bakken Shale to an unnamed buyer for $200 million.

Fleur de Lis, which is backed by private equity powerhouse KKR & Co. LP, is picking up 7,200 acres in Texas' Ector and Midland counties, located squarely within the Permian. The company said the properties are producing 5,200 barrels of oil equivalent per day — most of which will be oil — and has over 33 million barrels in reserves.

"We believe this represents an exciting opportunity to acquire high-quality producing assets that will benefit from ongoing development, and the application of new technologies, within the hydrocarbon rich Permian Basin," Jonathan Smid, the head of KKR's Natural Resources platform, said in a statement Friday. "This is an important step as we continue to expand our natural resources platform in partnership with Fleur de Lis Energy."

It's the second KKR-backed purchase made by Fleur de Lis since partnering with the private equity firm in March — the company bought gas wells in Mississippi from Penn Virginia in July for $73 million.

Linn said it will still have 6,600 net acres in the Permian's Midland Basin post-sale, producing approximately 8,000 barrels of oil equivalent per day.

Fleur de Lis is represented by a Kirkland & Ellis LLP team led by corporate partners Anthony Speier and David Castro, with assistance from debt finance partner Will Bos, tax partners Tom Evans and Ilan Napchan, environmental partner Paul Tanaka and executive compensation partners Scott Price and Mike Krasnovsky.

Counsel information for Linn wasn't immediately available. RBC Richardson Barr, Scotia Waterous and Wells Fargo acted as financial advisers to Linn in the Granite Wash and Cleveland deal, while RBC Richardson Barr acted as financial adviser in the Permian deal.

Counsel information for EnerVest wasn't immediately available.

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