LINN Energy, Inc. (OTCQB:LNGG) (“LINN” or the “Company”) announced today that it has signed a definitive agreement to sell its interest in properties located in the San Joaquin Basin, California to an undisclosed buyer for a contract price of $263 million, subject to closing adjustments.
This sale represents the first executed agreement of the Company’s non-core divestiture program. LINN continues to market the previously announced non-core asset sales and there remains significant interest in each of those packages. Year-to-date, the Company has announced sale agreements with contract prices totaling $844.5 million with net proceeds expected to be used to reduce outstanding borrowings under the Company’s revolving credit facility and term loan. Pro-forma for these transactions, the Company expects to have less than $50 million in total debt outstanding.
The California properties, located in Kern County, consist of approximately 500 total net acres in the South Belridge Field. First quarter net production was approximately 3,000 BOE/d, proved developed reserves of ~11.7 MMBOE(1) and proved developed PV-10 of approximately $168 million.(2) The Company forecasts full-year adjusted EBITDAX associated with these properties of approximately $30 million.(3) In the second half of the year, the Company had budgeted $21 million of capital for the development of these properties. This capital will be redeployed for the development of growth projects or used to further de-lever the balance sheet.
The transaction is expected to close no later than July 31, 2017 with an effective date of March 1, 2017. This transaction is subject to satisfactory completion of title and environmental due diligence, as well as the satisfaction of closing conditions.
Tudor, Pickering, Holt & Co. and Jefferies LLC acted as co-financial advisors and Kirkland & Ellis LLP as legal counsel during the transaction.
- Proved developed reserves as of March 1, 2017 with updated pricing of $3.00 per MMBtu for natural gas and $50.00 per bbl for oil.
- PV-10 represents the present value, discounted at 10% per year, of estimated future net cash flows. The Company’s calculation of PV-10 herein differs from the standardized measure of discounted future net cash flows determined in accordance with the rules and regulations of the SEC in that it is calculated before income taxes with the pricing and timing assumptions noted in footnote (1).
- The non-GAAP financial measure of adjusted EBITDAX, as defined by the Company, may not be comparable to similarly titled measures used by other companies. Therefore, this non-GAAP measure should be considered in conjunction with net income (loss) and other performance measures prepared in accordance with GAAP. Adjusted EBITDAX should not be considered in isolation or as a substitute for GAAP. As previously disclosed, total company (LINN Energy, Inc.) projected adjusted EBITDAX for 2017 is $496 million and total expected capital expenditures for 2017 is $413 million based on pricing estimates of $3.33 per MMBtu for natural gas and $50.51 per bbl for oil.