Linn Energy has experienced rapid market ascent since it went public in 2006. Linn Energy specializes in purchasing older gas and oil reserves neglected by larger competitors; its oil output climbed dramatically between 2005 and 2010 — from an average of 2,210 barrels of crude per day to 44,230 barrels per day.
According to the New York Mercantile Exchange, gas prices reached a 10-year low in January and still might further decline. Since BP intends to sell $38 billion of its assets by the end of this year, it will likely slough off its less profitable holdings — leaving room for smaller players such as Linn Energy to purchase the market influx of inexpensive energy futures.
The purchase is expected to close no later than March 30, and Linn has already established hedging agreements for the gas production it acquired. The established hedging agreements are set to maintain through 2016, and approximately 68% of the natural-gas liquids output have hedged.
The purchase includes 110 million cubic feet of natural gas production along with proven reserves of 730 billion cubic feet. About 63% of the reserve’s output is in natural gas, with the remaining output devoted to the gas-natural liquids. According to analyst estimates, the properties have a 2012 adjusted earning of $160 million.
– Adam Patterson, InvestorPlace Assistant Editor