This Area Could Be What LINN Energy Trades Next


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LINN Energy has a big acreage position in the Mid-Continent, which is becoming a real hot area for oil and gas drilling. Companies like Chesapeake Energy and Apache see big potential in the region.

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  • This Area Could Be What LINN Energy Trades Next

    1. 1. This Area Could be What LINN Energy Trades Next Photo credit: Apache
    2. 2.  LINN Energy recently announced its first asset trade in the Permian Basin.  With nearly 30,000 acres left to trade the company likely will make another deal in the future for at least some of this acreage.  One of the reasons LINN Energy is trading these assets is because it wants to lower its production decline rate.
    3. 3.  Horizontal oil and gas wells like those drilled in the Permian Basin are very high decline wells.  That doesn’t help the decline rate, which is why the company is looking to trade these assets for lower decline properties.  However, the Permian Basin isn’t the only area where the company has prospective horizontal acreage that can be traded away.
    4. 4.  LINN Energy also has a very large acreage position in the Mid- Continent.  It’s a region that like the Permian Basin is stacked with oil and gas plays. Source: LINN Energy Investor Presentation
    5. 5.  The problem with these assets is that the its one of LINN’s highest decline areas.  It’s one reasons why the company reduced its capital spending in the area this year.  However, while LINN Energy doesn’t like the decline rate, industry peers like Chesapeake Energy, Apache and others don’t mind.
    6. 6.  The problem with these assets is that it’s one of LINN’s highest decline areas.  This is one reason why the company reduced its capital spending in the area this year.  However, while LINN Energy doesn’t like the decline rate, industry peers like Chesapeake Energy, Apache and others don’t mind.
    7. 7.  LINN Energy would like to be able to take advantage of this to potentially monetize some of its acreage positions in the Mid-Continent in trades for more mature, long-lived assets that help it reduce its overall decline rate.  The company is currently cataloging its opportunities.
    8. 8.  LINN currently holds 95,000 net acres in the Granite Wash.  In addition to that the company holds more than 450,000 net acres in the Anadarko Basin. Source: LINN Energy website
    9. 9.  The Granite Wash is an area that both Apache and Chesapeake Energy really like.  Chesapeake Energy has 91,000 net acres in the core area of the Granite Wash and is running about five rigs in 2014.  Apache has 435,000 net acres and plans to drill 62 wells this year.  Both see the potential to increase activity in the future.
    10. 10. Chesapeake Energy’s Granite Wash position:
    11. 11. Apache’s Granite Wash position:
    12. 12.  In addition to the Granite Wash, drillers are looking at other areas within the Mid-Continent that one day might benefit LINN Energy’s position in the region.  Continental Resources, Devon Energy and others are focusing in on the SCOOP, STACK and Cana plays.  Meanwhile, SandRidge Energy and Chesapeake Energy are drilling in the Mississippian Lime.
    13. 13. Continental Resources SCOOP Position:
    14. 14. Devon Energy Anadarko Basin Growth:
    15. 15. SandRidge Energy’s core Mississippian position:
    16. 16.  Add it all up and LINN Energy’s Mid-Continent position is starting to become even more valuable to the company.  This is opening up endless opportunities for asset swaps as these companies look to consolidate positions and add more drilling inventory.  Further, a deal with LINN would give a quick boost to a new entrant to these stacked plays.
    17. 17.  LINN Energy appears to have substantial potential for asset trades in the Mid-Continent.  Like the recent Permian Basin trade these trades can lower the company’s decline rate, add to distributable cash flow and create operational synergies.  Needless to say, LINN Energy has a number of ways to improve as it still has a lot of options at its disposal. Investor takeaway
    18. 18. Do you know this energy take “loophole”?
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