Linn Energy LLC (NASDAQ:LINE) and LinnCo LLC (NASDAQ:LNCO) announced that LINN has signed definitive agreements with private capital investor Quantum Energy Partners (“Quantum”) to fund selected future oil and natural gas acquisitions and the development of acquired assets (“QL Energy I, LLC” or “AcqCo”).
Quantum has agreed to initially commit up to $1 billion of equity capital to fund acquisitions and development of oil and natural gas assets. LINN will have the ability to participate in all acquisition opportunities with a direct working interest ranging from 15 percent to 50 percent. AcqCo assets will be managed by LINN in exchange for reimbursement of general and administrative expenses. Additionally, after certain investor return hurdles are met, LINN will have the ability to earn a promoted interest in AcqCo. Upon the sale of any assets within AcqCo, LINN will be given right of first offer to acquire the assets.
Strategic advantages expected for LINN:
- Creates a “drop-down” entity in which assets can be purchased and harvested on an ongoing basis;
- Allows participation in acquisitions outside of the conventional MLP asset profile;
- Enhances ability to capture acquisition opportunities during distressed market conditions;
- Provides potentially more accretion to cash flow per unit as a result of the promote structure;
- Creates a long-term partnership with a private capital provider which is scalable and repeatable; and
- Provides LINN with the dynamic ability to acquire and finance acquisitions at the most advantageous times.
Strategic advantages expected for Quantum and QL Energy I, LLC:
- Opportunity to partner with a premier management team and company to acquire and develop assets of size;
- Creates a well-funded entity, whose principals collectively have an exceptional track record of acquisition-driven value creation and growth;
- Ability to leverage LINN’s existing scale of operations and workforce across multiple basins in the United States; and
- Creates a long-term partnership with the largest upstream MLP/LLC, with the ability to develop and then monetize mature assets efficiently over time.
“We are very excited to have finalized this new opportunity and are pleased to be working with Quantum in this unique partnership,” said Mark E. Ellis, Chairman, President and Chief Executive Officer. “We anticipate a number of attractive assets may come to market in the current environment and we expect these agreements will position the Company to take advantage of such opportunities.” (Original Source)
Shares of Linn Energy closed last Thursday at $9.16. LINE has a 1-year high of $32.74 and a 1-year low of $8.58. The stock’s 50-day moving average is $10.39 and its 200-day moving average is $11.20.
On the ratings front, Linn Energy has been the subject of a number of recent research reports. In a report issued on July 1, Raymond James analyst Rich Eychner reiterated a Buy rating on LINE. Separately, on May 18, Goldman Sachs’ Theodore Durbin assigned a Sell rating to the stock .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Rich Eychner and Theodore Durbin have a total average return of 3.3% and 11.1% respectively. Eychner has a success rate of 100.0% and is ranked #2612 out of 3689 analysts, while Durbin has a success rate of 58.8% and is ranked #838.
Linn Energy LLC is an independent oil and natural gas company. The Company’s properties are located in United States in Rockies, Hugoton Basin, California, East Texas and north Louisiana, Mid-Continent, Permian Basin, Michigan/Illinois and South Texas.